Minimum leave – waiver by judicial comparison of facts

The Federal Labour Court (Bundesarbeitsgericht, BAG) has now published a decision that will certainly be relevant in cases involving the termination of employment relationships where the termination date is still in the future. The BAG has significantly restricted the possibility of a judicial comparison of facts, with implications for the drafting of settlement or winding-up agreements.

The BAG considered an employee's request for compensation of untaken vacation. After the employee had been unable to work continuously from the beginning of 2023, the parties reached a court settlement in March 2023. This settlement terminated the employment relationship with effect from the end of the following month and classified the vacation entitlements as 'granted in kind'. The illness continued until the termination date. The employee subsequently demanded financial compensation for vacation days not granted. The BAG agreed with the Regional Labour Court Cologne that the waiver included in the settlement was inadmissible. In the present case, where the employee was prevented from taking vacation due to illness, there was no uncertainty about the conditions for entitlement, which could have been clarified by comparing the facts.

Practical tip:

In all termination scenarios, it is advisable to limit potential financial liabilities arising from vacation entitlements by granting irrevocable leave of absence. Of course, this presupposes that the employee's work is no longer necessary.

As the BAG does not leave the effective disposition of vacation compensation in the existing employment relationship to the contracting parties — even in cases where the end of the employment relationship is certain — the amount of the statutory vacation entitlement must be carefully checked. It is also advisable to state this amount and explicitly mention that it will be compensated.

The BAG saw no room for uncertainty regarding the actual conditions of the vacation entitlement. However, it is unclear from the press release when such uncertainty exists, and under which circumstances the issue of outstanding vacation can be resolved by comparing facts in cases where the termination date is in the future. It remains to be seen when the judgement will be published. Caution is required in the handling of outstanding vacation given the pending clarification by the Federal Labour Court. It is not advisable to grant outstanding vacation in kind if the termination date falls after the current date.