Germany: Expiration of Leave at Year’s End Is No Longer Automatic

 

By Anja Becher April 18, 2019
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​A German court has overturned a long-held principle in German law, and, as a result, a worker's leave no longer automatically expires at the end of a calendar year.

Ever since the German Federal Leave Act took effect, German employers have generally required that workers take the leave they accrue during a calendar year in that same calendar year. Otherwise, the leave would expire at the end of the year.

Carrying over leave into the following calendar year was possible only in exceptional cases regulated by law, such as if there were urgent operational reasons (e.g., if employees had to delay taking leave to work during a peak season) or personal reasons (e.g., employee illness). Even if leave carried over, it still would expire on March 31 of the following calendar year.

But the European Court of Justice ruled Nov. 6, 2018, that this automatic expiration was incompatible with European law.

German Case Law Brought in Line

Subsequently, the German Federal Labor Court decided in a Feb. 19 ruling that an employee's paid annual leave generally expires at the end of the year only if the employer reminds the worker about any unused leave time and asks the worker to take the time off. If the worker refuses, then the leave will expire at the end of the year.

In its ruling, the court referenced the European Working Time Directive, which states that the employer is obliged to encourage workers to take the paid leave granted to them. Otherwise, there is a considerable risk that employees will automatically save up paid leave, and if they leave their job, they could demand financial compensation for unused leave from previous years.

[SHRM members-only toolkit: Introduction to the Global Human Resources Discipline]

Best Practices

In view of the court's recent decision, employers should keep track of the number of days of paid leave that workers have yet to take. If employees have not applied for or taken leave by midyear, an employer should remind them how many leave days they have left and ask when they plan to take leave that calendar year.

If any employees still have not taken or planned to take leave by the end of the third quarter, the employer should again remind them how much leave time they have left. This time, the employer should ask workers in writing to take the remaining leave in the current calendar year, stating clearly that, otherwise, the leave will automatically expire at the end of the year.

Should a worker challenge the expiration, employers bear the burden of proof that all these steps were taken.

Employees should also be reminded that even if leave does carry over for urgent operational or personal reasons, it will expire by March 31 of the following calendar year. This notification should be made in writing, whether by e-mail, on leave request forms or in an online tool.

Anja Becher is an attorney with Ogletree Deakins in Berlin.

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