ECJ proposal on the limitation of vacation claims

BAG decision dated September 29, 2020 - 9 AZR 266/20

The European Court of Justice (ECJ) will have to decide whether employees' vacation claims are subject to the statute of limitations. The Federal Labor Court (Bundesarbeitsgericht - BAG) suspended the appeal proceedings pending under case number 9 AZR 266/20 by order of September 29, 2020 and referred the question to the ECJ for a preliminary ruling on whether Art. 7 Directive 2003/88/EC of the European Parliament and of the Council of November 4, 2003, concerning certain aspects of the organization of working time and Art. 31(2) of the Charter of Fundamental Rights of the European Union preclude the application of a national provision, such as Paragraph 194(1) in conjunction with Paragraph 195 of the German Civil Code (BGB), under which the right to paid annual leave is subject to a regular limitation period of three years (Press Release No. 34/20). 

Facts

The parties are arguing about the limitation of unfulfilled vacation claims from 2014 and previous years when the lawsuit is filed in 2018. 

The plaintiff was employed by the defendant from November 1, 1996 to July 31, 2017 as a tax clerk and accountant. Her entitlement to vacation leave was 24 working days per year. In a letter dated March 1, 2012, the defendant certified to the plaintiff that the "remaining vacation entitlement of 76 days from the calendar year 2011 and previous years" did not expire on March 31, 2012, because she was unable to take her vacation due to the high workload in his office. In the years 2012 to 2017, the defendant granted the plaintiff leave for a total of 95 working days. In the action filed on February 6, 2018, the plaintiff demanded compensation for 101 vacation days from 2017 and previous years. In the course of the lawsuit, the defendant raised the plea of limitation and asserted that the regular limitation period of three years (Section 195 BGB) had expired before the termination of the employment relationship for the vacation entitlements for which the plaintiff demanded compensation.

Previous instance denies limitation period with reference to Art. 7 para. 1 of Directive 2003/88/EC

The Regional Labor Court (Landesarbeitsgericht - LAG) upheld the complaint and ordered the defendant to pay compensation for 76 vacation days from 2013 to 2016 (LAG Düsseldorf, February 21, 2020 - 10 Sa 180/19). Contrary to the opinion of the defendant, a limitation of the vacation days from the years 2014 and previous years was out of the question, according to the LAG. The defendant had not fulfilled its obligations to cooperate, so that they had not lapsed pursuant to Sec. 7 (3) BUrlG. It would violate Art. 7 (1) of Directive 2003/88/EC if the employee could no longer assert his non-expired vacation entitlement after the third year following the vacation year solely because the employer had not fulfilled its obligation to cooperate with regard to the vacation entitlement not only once but continuously. 

BAG affirms relevance of decision

The BAG, like the previous instance, points out that if § 7, Subsection 3, BUrlG is interpreted in conformity with Union law, the entitlement to the statutory minimum vacation generally only expires at the end of the calendar year or of a permissible carryover period if the employer has specifically requested the employee to take his vacation in good time in the vacation year and has informed him that otherwise the vacation may be forfeited (see press release of the Federal Labor Court, No. 9, dated February 19, 2019). The defendant had not fulfilled these obligations, which is why the plaintiff's vacation entitlement could not be forfeited pursuant to Sec. 7 (3) BUrlG.

Therefore, according to the Ninth Senate of the Federal Labor Court, it is relevant for the decision whether the unfulfilled vacation claims of the plaintiff from 2014 and the previous years were time-barred when the action was filed in 2018 pursuant to Sec. 194 (1) in conjunction with Sec. 195 BGB. Whether this would have to be reconciled with the employer's obligation to cooperate as stipulated by the ECJ is now the subject of the question submitted to the ECJ for a preliminary ruling, which the ECJ will have to deal with.

Practical relevance

The question raised by the BAG in this case is of paramount importance for practice, especially since the vast majority of employers - like the defendant here - are unlikely to have observed the obligation to cooperate in the past, which was only established by the ECJ in November 2018. Since the ECJ does not grant any protection of legitimate expectation in this respect, the question arises in a large number of cases as to whether a violation of the employer's obligation to cooperate - even more so in ignorance of its existence - leads to an unlimited accumulation of (residual) vacation claims, or whether the employer at least has the objection of the statute of limitations as a regulatory measure.

The answer to this question is by no means predetermined. For example, it should be remembered that the ECJ has denied an unlimited accumulation of vacation claims in connection with long-term illnesses.

Conclusion: It certainly remains exciting!