No vacation in the passive phase in partial retirement

Press release Federal Labor Court of September 24, 2019 – 9 AZR 481/18

The Federal Labor Court’s jurisdiction on vacation law has been undergoing radical change for some time, based on the case law of the Court of Justice of the European Union, whose understanding of the entitlement to annual leave differs fundamentally from that of the Federal Labor Court. Most recently, the Federal Labor Court was therefore required several times to change its previous jurisdiction on the scope of the entitlement to annual leave. This was also the case in its decision of September 24, 2019– 9 AZR 481/18 – (see Federal Labor Court press release of the same day), which dealt with the question of whether an employee acquires entitlements to vacation in the block model during the release from work phase in partial retirement, which are to be compensated at the end of the employment relationship.

The facts of the case:

In the case decided by the Federal Labor Court, the plaintiff was initially employed by the defendant on a full-time basis. With effect from December 1, 2014, the parties agreed to reduce working hours to half of the original working hours in what is referred to as the block model within the scope of partial retirement. According to this agreement, the plaintiff was obligated to work during the first part of his semi-retirement until March 31, 2016 to the same extent as previously. Subsequently, he was released from work until July 31, 2017. The plaintiff received the proportionately reduced salary plus top-up amounts for the duration of the entire partial retirement period. In the passive phase of partial retirement, the plaintiff was not granted vacation. The plaintiff argued that the defendant owed him compensation for the vacation days not taken during the period of release from work.

The plaintiff failed to succeed with his argumentation in the lower courts. The appeal was also unsuccessful.

No entitlement to vacation during paid (agreed) periods of release from work

According to the Federal Labor Court, part-time retirees who are in the release phase of their employment relationship and who are released from their obligation to work during the entire calendar year have no legal entitlement to annual leave due to a lack of obligation to work. When changing from working to being released from work in the course of a year, the annual leave should be computed by the relevant time periods according to the number of working days. The period of release from work should be set at “zero” working days calculating the number of days of annual leave, leading to a vacation entitlement of “zero” days for that period. The obligation to work was not only suspended during this period, it no longer existed per se. The assessment is not different from the point of view of equality, either. There is no comparability with employees who worked in the same period, so that neither statutory provisions nor standards of Union law concerning the latter employees are to be applied to semi-retired employees in the block model. In the present case, this would apply not only to the plaintiff’s entitlement to statutory leave, but also to any contractually agreed additional vacation, since the parties had not agreed on any derogating provisions in this respect.

Consistent adaptation to the case law of the CJEU

With the relevant decision, the Federal Labor Court once again follows the case law on annual leave of the Court of Justice of the European Union and, in a departure from its previous jurisdiction, denies an entitlement to vacation for periods of paid (agreed) release from work. This is a consistent application of CJEU case law, according to which the entitlement to vacation for the respective period is to be computed separately in cases of a change of working days owed during the year. For periods in which employees are agreed to be released from work, no vacation days are to be granted since there are no working days. 

TIPS FOR USE IN PRACTICE

It is welcome to note that the Federal Labor Court’s decision creates legal certainty with respect to the long-discussed issue of the entitlement to vacation in the release from work phase in partial retirement in the block model. It remains to be seen, however, whether the Federal Labor Court will also apply this jurisdiction to other times in which the obligation to work does not exist on the basis of an agreement such as within the scope of a cancelation agreement. This would be desirable in view of the fact that it would significantly simplify the handling of cancelation agreements with consensual phases of release from work.