The Court of Justice of the European Union (CJEU) strengthens the entitlement of employees to paid annual leave or holiday compensation in a ruling on 6 November 2018. There is now a need for action on the part of employers.
The CJEU ruling concerns the interpretation of EU law as far as the forfeiture of holiday entitlements is concerned. The background is a case before the German Federal Labour Court (BAG): a private employer asked its temporary employee to take the rest of his vacation, but did not specify any specific vacation period. The employee did not follow this request and, after leaving the company, demanded holiday compensation for the days not taken.
So far, Section 7 (3) of the German Federal Vacation Act (BUrlG) has been interpreted as follows: an employee who does not apply for leave in the year in which leave is granted loses his or her entitlement to leave at the end of that year. A transfer to the next calendar year will only take place if the leave could not be taken in the year in which leave is granted due to urgent operational reasons or reasons attributable to the employee.
According to the previous principles of vacation law, the employee would not have been entitled to holiday compensation in the present case. After all, the employee had not applied for leave, which led to the expiry of the vacation entitlement. The CJEU ruled on the questions of the BAG regarding the interpretation of European Union law:
Many companies are already making sure that their employees take the paid annual leave to which they are entitled. If this is not the case, employers will immediately run the risk of the having to allow the employee to take any remaining leave or paying compensation for unused leave when the employment relationship ends. Employers can counteract this economic and legal risk by aligning their operational procedures for vacations in accordance with the new case law. For example, an adjustment of employment contracts, appropriate vacation management and clear, concrete instructions to employees on the possible expiry of vacation entitlements are conceivable.
Karsten Kujath, LL.M.oec.int., Attorney at law