June 1, 2018
Authored by: Martin Lüderitz
Under German law, employees generally apply for holiday during the holiday year so that their claims can be fulfilled. If they fail to do so, their entitlement lapses at the end of the year. When employees leave their firms, they cannot claim compensation for unused holiday. A recent Advocate-General’s opinion has now thrown doubt on this practice.
This area has been under scrutiny, as several Regional Labour Courts have granted employee claims for compensation in the form of a substitute holiday (or compensation) specifically in cases where the employee has not applied for holiday during the year. Up to now, the question of whether the employee is also entitled to compensation after failing to submit the appropriate holiday request was unresolved because the German Federal Holiday Act does not contain a corresponding provision.
Two cases on this issue presented by the Federal Labour Court and by the Higher Administrative Court of Berlin-Brandenburg (Case Nos.: C-619/16 and C-684/16) are currently being considered by the European Court of Justice (ECJ). In one, an employee sued a former employer for damages for untaken holiday although the employee had not applied for leave during the relevant calendar year. The claim was upheld by the Regional Labour Court. However, on appeal the German Federal Labour Court had its doubts and asked the ECJ to consider whether a holiday request is required before an employee is entitled to be compensated for untaken holiday at the end of the period under consideration.
Advocate-General Yves Bot presented his opinion on 29 May 2018. In his view, just because an employee did not request a holiday, his claim for compensation concerning the non-taken holiday does not expire. Employees do not necessarily have to apply for holiday in order to prevent their entitlement from lapsing at the end of the leave year. Further, such employees are also still entitled to be compensated for untaken holiday on termination.
If the ECJ follows the Advocate-General’s recommendation, this would mean a dramatic turnaround in holiday law for German employers. This would result in an obligation to compensate untaken holiday even if the employee did not apply for holiday during the relevant year. This could lead to multiple problems in practice. For example, would an employer be obligated to grant holiday without an application and could an employee, possibly against his will, have holiday “imposed” at a certain time by the employer because the employer wishes to avoid liability for compensation?
The Advocate-General expressly notes that employers can avoid liability for compensation if they can demonstrate that they did everything to make the employee’s holiday possible. This is potentially helpful but this could lead to new disputes. Practically, employers will need to more actively review whether employees have already applied for holiday during the year in order to be able to rely on this exception. Additionally, employers should check how to make employees contractually obligated to file holiday applications on time, to avoid employees accruing holiday for which they will be entitled to compensation.
Bryan Cave Leighton Paisner LLP has a team of knowledgeable lawyers and other professionals prepared to help employers assess their obligations. If you or your organization would like more information on holiday applications or any other matter, please contact an attorney in the Employment and Labor practice group.