February 2023 update
That Federal Labor Court (BAG) Decided on 20.12.2022 that unused vacation days only expire if the employer has met its information and requests beforehand. This means that vacation days can accumulate for an indefinite period of time over the course of employment if the employer does not inform the employee of the impending expiry.
Prior to this decision, experts were overwhelmingly of the opinion that the accumulation of unused vacation days was limited at least by the limitation period and that they would therefore potentially expire after 3 years after the end of the respective calendar year — regardless of whether or not the employer complied with her information obligations.
However, this is now a thing of the past and the recent decision has significantly increased the financial risks for employers associated with unused vacation days.
The BAG also clarified that with long-term illness if the employee has still worked in the relevant vacation year, unused vacation days expire after 15 months after the end of the calendar year only if the employer has informed the employee of his open vacation days in good time — i.e. before becoming unable to work — and has drawn attention to the impending expiry.
After many employers who have already been following the Verdict in December panicked and imagined swarms of former employees making compensation claims for unused vacation days from several years or even decades ago, the FOPH was able to Judgment of January 31, 2023 calms your nerves a bit again.
The court made an important distinction here with regard to the differentiation between Vacation entitlement itself and the Vacation compensation claim , which “replaces” the vacation claim after termination of the employment relationship.
According to the BAG, the monetary compensation claim expires — in contrast to the vacation claim itself — even if the employer has failed to comply with its information obligations vis-à-vis the respective employee.
What does that mean in practice? The risk of an infinite accumulation of unused vacation days is real as long as the employment relationship lasts. As soon as the employment relationship ends, the outstanding vacation claim is converted into a compensation claim. This compensation claim is subject to the statutory three-year limitation period — regardless of whether the employer has met its notification and request obligations.
The employee therefore has 3 years after the end of the calendar year in which the employment relationship ended to assert this claim.
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Original post:
Now is the time to decide whether you want to allow your employees to transfer the vacation days remaining at the end of this year to next year. If not, we recommend that employees submit their vacation requests as soon as possible. Here we explain why such a notice is necessary and what you need to consider when notifying employees.
In addition: At the end of the article, you'll find a template that we've created so that you can legally notify your employees.
Legal background: Does vacation automatically expire at the end of the year?
According to Section 7 (3) sentence 1 BURLG, vacation must be taken and granted in the current calendar year and the automatic expiry of vacation entitlements has been derived from this for a long time. Since the FOPH verdict From 2019, which has implemented the requirements of the ECJ on vacation law, however, it is true that vacation anymore expires automatically at the end of a calendar year. Instead, vacation days only expire if the employer has specifically asked its employees to take them beforehand and has pointed out the otherwise imminent expiry of the vacation. It is therefore advisable to inform all employees at the beginning of the year and again during the year, but especially employees who, a few months before the end of the year, show that they have not yet taken up significant amounts of vacation.
What do you have to consider when making a notification?
A corresponding message must be written at least in text form, i.e. the request by e-mail is sufficient, provided that access can be proven. The following points are important:
- How many vacation days are still pending in the relevant calendar year
- That leave is requested as soon as possible so that it can be taken in the same year
- That the vacation expires if it is not taken by the end of the calendar year or the transition period (depending on internal rules of the company, e.g. carry-over until March and up to 5 vacation days possible).
It must also be stated whether vacation from the previous year has been transferred, how many days are involved and when this vacation expires (remaining vacation from the previous year). In addition, it is not enough if the message is sent to all employees in a lump sum. Instead, affected employees must be contacted individually so that they can confirm receipt of the message, e.g. by signing or responding to the email.
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