The Kreuzer Tip: Vacation Compensation Claims
Statute of limitations for vacation claims and vacation compensation claims
In its ruling of December 20, 2022 (Case No. 9 AZR 266/20), the Federal Labor Court decided that an employee's vacation entitlement is in principle subject to the statute of limitations, but that the limitation period does not begin to run until the employer has fulfilled its duties to inform and advise in this regard. In order to fulfill these obligations, the employer must inform its employees once a year about outstanding vacation and request them to take it with reference to the otherwise occurring expiry.
The vacation entitlement releases the employee from the obligation to work for recreational purposes with continued payment of wages. The general limitation period of three years from Section 195 of the German Civil Code (BGB) also applies to the vacation entitlement.
However, the period does not begin until the end of the year in which the employer has fulfilled its duties to inform and advise the employee of the outstanding vacation and its expiry and the employee has nevertheless not taken the vacation of his or her own accord.
This has the consequence that the employee's vacation entitlement cannot expire as long as the employer has not fulfilled its duties to provide information and advice. Under certain circumstances, a large number of vacation days not taken can therefore accumulate during the current employment relationship.
The entitlement to compensation for vacation is due upon termination of the employment relationship and serves as financial compensation for vacation days still outstanding. It is a purely monetary claim. This claim is itself subject to its own three-year limitation period and begins at the end of the year in which the employment relationship ends. In the case of this claim, however, the cooperation of the employer has no influence on the start of the limitation period.
A transitional period applies for the start of the limitation period in the case of the vacation compensation claim, as the rules for the forfeiture of vacation have only been established since the judgment of the European Court of Justice of 06.11.2018 (Case C-684/16). In practice, this means that the limitation period for the vacation compensation claim can begin at the earliest at the end of 2018.
The Kreuzer Tip
Employers are strongly advised to notify their employees once a year of any outstanding vacation, to ask them to take it and to point out that vacation days will otherwise be forfeited. This avoids years of accumulating vacation days that must still be granted during the current employment relationship or, if necessary, compensated in cash upon termination. We will be happy to advise you on how to comply with these obligations to provide information and to check any outstanding claims.