Caution required for employers: No Expiry of Unreduced Vacation Entitlements during Parental Leave

BAG of March 19 2019 - 9 AZR 495/17

The employer may reduce the vacation entitlement of a worker on parental leave by one twelfth for each full calendar month. If he does not exercise his right to reduce or if he can not prove the declaration of reduction, vacation entitlement does not expire during parental leave in accordance with Sec. 7 para. 3 BUrlG [German federal vacation law] at the end of the vacation year or the transfer period (31 March of each year). In the event of termination of employment after parental leave, the employee may then claim compensation for his vacation entitlement for the entire period of parental leave.

FACTS OF THE CASE

After giving notice, the employee asked for compensation for vacation for the period of parental leave (almost 6 years in total). It was disputed between the parties whether the employer had made use of its right to reduce. The labor court then ordered the employer to financially compensate the employee for the partial vacation entitlement which she was entitled for the last year of her employment. The Court then dismissed the remainder of the claim brought by the employee. The Baden-Wuerttemberg LAG [German State Labor Court] then rejected the employee's appeal and the employer's cross appeal.

DECISION

The employee's appeal before the BAG [German Federal Labor Court] was successful and led to the referral of the case to Baden-Württemberg LAG. The BAG believes that the time limits of Sec. 7 para. 3 BUrlG does not apply during parental leave because of the more specific provision contained in Sec. 17 para. 1 (1) and para. 2 BEEG [German parental allowance and parental leave law]. The provision constitutes an exception to the principle that vacation leave must be granted and taken in the current calendar year. Sec. 17 para. 2 BEEG provides an independent regulation on the vacation year, deviating from Sec. 7 para. 3 BUrlG, with respect to the fulfillment and the lapse of the vacation leave. The provision decouples the vacation entitlement, which is in principle subject to the reduction, from the vacation leave year, and therefore excludes it from forfeiture during the period of parental leave pursuant to Sec. 7 para. 3 BUrlG. The statutory reduction power – which is in accordance with EU law – prevents the accumulation of vacation days against the will of the employer for periods when the work obligation no longer applies due to parental leave. The LAG expressly left open the question of whether a reduction took place by the employer, so that it is not yet clear whether the employer actually reduced her employee's vacation entitlement. A referral to clarify this crucial question was therefore essential from the point of view of the BAG.

PRACTICAL TIP

To the extent that employers want to make use of their ability to reduce vacation entitlements during parental leave, a legal declaration is required. The possibility of reduction only exists if the employee is on parental leave and does not work at all for the employer during this time – not even part-time. The declaration of reduction may take place expressly or implicitly, i.e. also verbally or in text form (e.g., by email). The declaration should also be understood as such by the employee. According to the BAG, this is not the case, for example, with the disclosure of the (reduced) vacation days in payroll accounting. The receipt of the declaration should also – as this decision once more shows – be demonstrable (e.g. by delivery by messenger or acknowledgment by the employee with regard to receipt or via email with read receipt requirement). With regard to the timing, the employer should note that the declaration must be made at the earliest after the employee's declaration that he would like to take parental leave and must be submitted to the employee at the latest after the end of parental leave, but before the employment relationship ends. It is therefore recommended that the employer establishes a corresponding process within its company which ensures the proper submission and receipt of the reduction declaration as well as its traceability.