Does the leave never become time-barred? ECJ strengthens leave entitlement in case of limitation and expiry!

In three German cases, the Luxembourg judges ruled that the leave entitlement does not become time-barred or expire under certain circumstances. It is decisive whether or not the employer met its obligations to cooperate and informed the employee that the vacation is about to expire. For the statute of limitations to apply, the employer must first have put the employee in a position to actually exercise his or her leave entitlement by issuing a corresponding request.

The decisions

In the first case, a qualified tax clerk had, after termination of her employment relationship, brought an action for compensation of her annual leave from the years 2013 to 2017 which she could not take due to the heavy workload. When the former employee claimed compensation for vacation from previous years in 2018, her employer invoked the statute of limitations for these claims. However, he had not met his obligations to cooperate and had not mentioned that the leave could expire if it was not taken by the employee in due time.

The Solingen Labor Court (decision of February 19, 2019, case no. 3 Ca 155/18) rejected the complaint with regard to the claims which had become time-barred under national law; the Düsseldorf Regional Labor Court (decision of February 2, 2020, case no. 10 Sa 180/19) upheld the action. The German Federal Labor Court (“BAG”) (order for reference dated September 29, 2020, case no. 9 AZR 266/20 [A]) referred the matter to the ECJ for a preliminary ruling. The ECJ was to clarify whether EU law permits the limitation of leave entitlements despite a breach of the duty to inform.

The Luxembourg judges ruled that the statutory leave entitlement was generally subject to the general, “regular” limitation period of three years. However, the limitation period did not start automatically. Rather, the employee must have positive knowledge of the circumstances establishing his leave entitlement in order for the three-year limitation period to start. This required the employer to put the employee in a position to actually take the leave. To that end, the employer must have informed the employee about the scope of the still existing vacation days, must have advised him on the decisive deadlines for the taking of the leave, and must finally have requested the employee to actually take the leave. Only when the employer complies with this duty to inform, the regular limitation period begins to run. If the employer does not comply with his duty to inform, he should not be “rewarded” by the fact that the employee's claims become time-barred.

In two further proceedings dated September 22, 2022 (case no. C-518/20 and C-727/20) relating to the leave entitlement in case of long-term sickness, the ECJ decided that it was generally in compliance with European law for leave entitlements to lapse 15 months after the end of the respective vacation year in case of un uninterrupted incapacity for work. However, this only applied if the employer had pointed out such fact in advance.

Ramifications and practical advice

Do employers now have to prepare for a wave of lawsuits regarding vacation (compensation) claims from the past? This depends on how the BAG distributes the duty of disclosure and the burden of proof with regard to the outstanding vacation claims in the decisions’ pending implementations.

In order to achieve a limitation or forfeiture of the leave entitlement, employers must meet their obligations to cooperate and provide information. We therefore strongly recommend – if this is not already the case – to issue to their employees annual letters of request to take leave, indicating existing remaining leave entitlements and their impending forfeiture. Only employers providing such proof can invoke the statute of limitations or forfeiture.