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Holiday entitlement

Accrual during unpaid leave
(Federal Labour Court (BAG), decision of 06/05/2014 9 AZR 679/12)

Statutory holiday entitlement continues to accrue during periods in which the employee is not actually working, for as long as an employment relationship exists even if suspended. The employer is entitled to proportionally reduce the statutory holiday entitlement of an employee in the special cases of parental leave and military service, in accordance with special statutory provisions. Nevertheless, in all other cases the employer must grant holidays in full even if the employee was not actually working for some of the time, due to illness, for example. In the case of protracted illness, employers recently were relieved to learn that although holiday entitlement continues to accrue during such time, the holiday entitlement now lapses 15 months after the end of the holiday year in which it accrued if not taken by that time.

However, a recent decision by the Federal Labour Court (BAG) encourages vigilance with regard to another aspect of holiday entitlements, namely those that accrue over the course of any grant of unpaid leave. Some employers offer their staff the opportunity to take a sabbatical year (one year of leave after six years of regular work) or another form of long-term leave without pay. Often, unpaid leave is only granted at the special request of individual employees, for such purposes as rectifying family problems, caring for friends or family, pursuing or continuing education, acquiring additional qualifications or sailing around the world. In the latter case, in particular, an employer might think that the employee's need for recreation is satisfied with the unpaid leave. The Federal Labour Court (BAG) views things differently, however: holiday entitlement accrues during unpaid leave just as it does during normal working periods and must not be proportionally reduced, not even on the basis of contractual agreement. It is an especially bitter pill for employers in cases when the employee leaves the company at the end of a period of unpaid leave; the employer must then (at minimum) provide compensation for the holidays accrued during this leave.

Recommendation for practice:

This should be the final trigger for differentiating in employment contracts between the statutory minimum holiday entitlement and the additional holidays granted voluntarily by the employer, and to subject both types of holiday to different rules. The statutory holiday entitlement is best governed by the rules of the Federal Holiday Act and case law, which are friendly to employees; on the other hand, the voluntarily-granted additional holiday time is best governed by rules devised by the employer, which can be structured with considerably more freedom.

In deciding whether to grant unpaid special leave, the costs resulting from the employee's holiday entitlement or compensation in this regard should be taken into account.

Sabine Feindura
Lawyer and specialist
for employment law
Sabine Feindura

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