New ECJ Decision: No Automatic Start Of The Limitation Periods For Paid Annual Leave Days

Paid annual leave days in Germany have been the subject of several decisions by the European Court of Justice (ECJ) in the recent past. The Luxembourg judges regularly opposed the previous case law of the Federal Labor Court regarding paid annual leave days. In the past, this concerned, among other things, the forfeiture provisions in the Federal Paid Leave Act. The ECJ – and subsequently also the Federal Labor Court – consider the employer to be under an obligation to inform employees about existing paid annual leave entitlements as well as their forfeiture and to request that they be claimed (we reported). Only then is there any forfeiture at all. In three recent decisions, the ECJ has once again comprehensively dealt with the employer’s obligations in connection with paid annual leave entitlements.

No Automatic Start of the Limitation Periods for Annual Paid Leave

The decision of the ECJ of September 22, 2022 – C-120/21, in which the ECJ ruled on the limitation period for paid annual leave claims, is likely to be particularly explosive and momentous. According to the case law of the German labor courts, the start of the three-year limitation period for paid leave claims has so far not depended on whether the employer has fulfilled its obligations to inform and cooperate with regard to the annual paid leave. The ECJ once again took a different view and ruled: The statute of limitations for the leave does not apply, if the employer has not fulfilled its aforementioned obligations.

The decision was based on the following facts:

An employee sued for compensation for her paid annual leave from previous years, which she was unable to take in full due to the large volume of work. The employer had not fulfilled its obligations to inform and cooperate in connection with the leave. Nevertheless, the employer invoked the statute of limitations for these claims insofar as they arose more than three years ago. After the legal dispute had reached the Federal Labor Court, the latter referred the matter to the ECJ for a preliminary ruling.

The Court now ruled that the German law regarding a statute of limitation for paid annual leave was not compatible with the European Working Time Directive. Employees must be informed of their rights and consequences of not taking their paid annual leave by the employer before the start of the limitation period for a paid annual leave entitlement. The employer could therefore not invoke the defense of limitation if it had not complied with its obligations to inform and cooperate. The employer could prevent late claims by employees for untaken annual leave by complying with its aforementioned obligations.

In its decisions, the ECJ once again left open the question of when and in what manner the employer must fulfil its obligations. How the decision on the limitation of paid annual leave claims in particular will affect German practice now essentially depends on how the Federal Labor Court will implement the ECJ’s requirements.

No Automatic Forfeiture of Leave in the Event of Illness

In the two further decisions of September 22, 2022 – C-518/20 and C-727/20, the ECJ once again dealt with the regulations on the forfeiture of paid annual leave entitlements: In principle, statutory paid leave of employees who could not take such leave due to illness may lapse after 15 months. However, this only applies if the employer complied with its obligations to notify and cooperate with regard to the statutory paid leave of the year in which the employee fell ill, and the employee was still working before falling ill and could have taken their paid leave then.

The aforementioned decisions make one thing even clearer: Employers should, if they have not already done so, introduce a system whereby each employee is made aware in good time of existing annual paid leave entitlements and of the consequences of not taking them by the end of a calendar year.