So far, it was customary and decided by the Federal Labor Court (BAG) in constant jurisdiction, despite increasing criticism of some regional labor courts, that holiday claims expire automatically, if the employee did not request the holiday in time. With Sec. 7 para. 3 of the Federal Vacation Act (Bundesurlaubsgesetz, BUrlG) it was regularly justified that not requested vacation at the end of the year, at the latest however with expiration of three months of the following year, expires. Financial compensation for unapplied holiday entitlements therefore did not take place at the end of the employment relationship due to forfeiture.
2. Core content of the current judgement
With the recent decisions relating to Directive 2003/88 (C-619/16 and C-684/16), the European Court of Justice (ECJ) sets a new direction and sets high hurdles for an expiration:
An employee may not automatically lose his or her holiday entitlement because he or she has not applied for a holiday.
The only exception is when the employer has enabled the employee to take his holiday and the employee has deliberately and, in full knowledge of the facts, waived the right to take the holiday. This means that the employer should in fact encourage the employee to apply for the holiday to which he is entitled.
The ECJ has also ruled that the burden of proof that the employee was required to do so lies with the employer.
While it should be made clear […], that compliance with the requirement, for employers, […] should not extend to requiring employers to force their workers to actually exercise their right to paid annual leave […] the fact remains that employers must, however, ensure that workers are given the opportunity to exercise such a right […].
3. Effect and need for action
The new case law of the ECJ has far-reaching effects on the holiday practice of employers.
It has a direct effect on cases in which the leave was not taken in full in the current reference year and no leave application has been submitted. In contrast to the previous situation, the leave in this case does not expire at the end of the year.
The same should apply - even if not explicitly decided - to holiday claims which were initially carried over to the following calendar year (for operational or personal reasons, see Sec. 7 para. 3 BUrlG) but were not applied for and taken by 31 March. Also these holiday claims do not expire without a holiday request. Should the employment relationship now end, the holiday entitlements not applied for would also have to be compensated financially.
In view of the approaching end of the current year 2018, there is an acute need for action. Employers should immediately obtain an overview of outstanding holiday entitlements and promptly request their employees to take the remaining leave.
The request should be formal and should indicate that the leave not yet applied for would otherwise expire. In the event of a dispute, the employer must be able to prove that such a request existed.
4. Outstanding action
However, amongst others the question remains as to when the employer must send its employees the formal request to be considered "timely". In any event, such a request is possible for leave entitlements carried over to 2019.
Accordingly, it is also unclear whether employers will be able to request this in time for 2018. It has also not been clarified which requirements must be made of a "formal notification".
5. Bottom line
In future, employers should have an overview of the holiday entitlements of their employees and should formally request them to take leave regularly and, above all, in good time (e.g. at the end of the summer months). Employers should also pay attention to the verifiability of the request, as in case of doubt they have the burden of proof, i.e. the request should be made in text form (e.g. by e-mail, fax, SMS, WhatsApp etc.) and the employee's receipt can be proven. If an employee does not take the leave despite the requests, this is his conscious decision, so that in these cases the leave (continues to) expire.