BAG on the expiry and time-barring of holiday claims: employer’s indication decisive

Questions concerning the expiry and time-barring of holiday claims have been the subject of labour court disputes since time immemorial. As recently as September 2022, the ECJ ruled in two preliminary ruling proceedings, firstly on the time-barring of holiday claims and, secondly, on the expiry of holiday claims in the event of (long-term) illness and incapacity for work.

In essence, the ECJ ruled that a statute of limitations and a forfeiture of claims to (payment in lieu of) holiday could only come into consideration if the employer had fulfilled its cooperation obligations with regard to the holiday claim. The only exception is in the case of uninterrupted permanent incapacity for work. See also our article "Time-barring of holiday claims - the next surprise for employers?"

The Federal Labour Court [Bundesarbeitsgericht, BAG] dealt conclusively with the two cases today.

Time-barring of holiday claims (BAG - 9 AZR 266/20)

The factual situation

The employee demanded payment in lieu of holiday for a total of 101 days of holiday. The sued employer invoked the statute of limitations for the claim to payment in lieu of holiday. The employee countered this with the argument that the holiday claim could not be time-barred because the employer had not fulfilled its cooperation obligation. In other words: she had not been correctly informed of her (remaining) holiday claims and the expiration dates.

Judgement of the ECJ

The ECJ confirmed the plaintiff’s legal opinion in the context of a preliminary ruling procedure (ECJ, judgement of 22 September 2022 - C-120/21). The limitation period only begins to run if the employer has fulfilled its cooperation obligations. 

Decision of the BAG

Unsurprisingly, the BAG ruled today that, although an employee's statutory entitlement to paid annual leave is subject to the statutory limitation period, the three-year limitation period does not begin to run until the end of the calendar year in which the employer has informed the employee of their specific holiday claim and the expiration periods and the employee has nevertheless failed to take the holiday of their own accord. The BAG has thus implemented the case law of the ECJ.

Expiry of the holiday claim in the event of long-term incapacity for work (BAG - 9 AZR 401/19)

The factual situation

The suing employee had been on continuous sick leave since 2017. The plaintiff had not taken her entire statutory holiday for 2017. The sued employer had not asked the plaintiff to take her holiday or informed her that such holiday could expire at the end of the calendar year or the carry-over period. In her legal action, the plaintiff sought a declaratory judgement to the effect that she is still entitled to 14 days of holiday for 2017. The lower courts dismissed the case. 

Previous case law

Previously, according to the BAG, holiday claims in the event of long-term illness generally lapsed without replacement no later than 15 months after the end of the respective holiday year. The question that now arose was whether this is also the case if the employer has not fulfilled its cooperation obligations, i.e. failed to ask the employee to take their holiday. 

Case law of the ECJ

The ECJ distinguished two scenarios in the preliminary ruling procedure: If an employee is continuously incapacitated for work, the 15-month forfeiture period remains in effect. If, on the other hand, the employee has been (partially) fit for work in the current calendar year, then the employer also has to fulfil its information obligations vis-a-vis employees who have been on long-term sick leave. If the employer does not fulfil this obligation, the residual holiday of this holiday year does not expire after the 15-month forfeiture period in case of the employee's illness or reduction in earning capacity. 

Decision of the BAG

The BAG agreed with this. It states that the 15-month period only applies if the employee was consistently incapacitated for work due to illness and/or the employer has fulfilled its cooperation obligation.

However, the situation is different if the employee actually worked during the holiday year before becoming fully incapacitated for work due to a reduction in earning capacity or due to illness. In this case, the forfeiture of the holiday claim presupposes that the employee had the opportunity to actually take their holiday in good time before becoming incapacitated for work. 

What needs to be done? 

The two rulings issued shortly before the end of the year clearly show once again how important it is for employers to fulfil their cooperation obligations with regard to the holiday claim. Only then can the claim to (payment in lieu of) holiday actually expire.

We therefore advise all employers to review their internal processes to ensure they comply without exception to the existing cooperation obligations with regard to the holiday claim, also in respect of employees on long-term sick leave.

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