Commented decision: Compensation of leave entitlements in case of the employee’s death

Decision of the Federal Labor Court from January 22, 2019 (9 AZR 45/16)

 

The plaintiff was the sole heir of her husband, who died on December 20, 2010. Due to his death, the husband’s employment relationship with the empoyer ended that day. For 2010, the employee was entitled to 30 paid leave days from the collective bargaining agreement for the public sector (TVöD) plus two days additional paid leave on a pro rata basis due to recognition as a severely disabled employee in the same year. Of these 32 vacation days in total, the employee had only taken seven days up to his death. Hence, the widow demanded compensation for the 25 remaining paid leave days not yet taken, which were awarded to her by all court instances.

In its ruling, the Federal Labor Court decided that in the event of termination of an employment relationship due to the employee’s death, their heirs are generally entitled to compensation for the paid leave days not taken by the employee.

Previously, the Federal Labor Court had only affirmed such a compensation of the employee’s heirs if a corresponding claim had already arisen during the lifetime of the deceased employee (cf. in particular Federal Labor Court judgment of March 12, 2013, 9 AZR 532/11). If however, the employment relationship was only terminated by the death of the employee, the Federal Labor Court previously held the view that remaining paid leave claims were lost with the employee’s death and did not convert into a claim for compensation of the heirs. This previous legal opinion of the Federal Labor Court was no longer sustainable after the decision of the European Court of Justice of November 6, 2018 (C-569/16, C-570/16), according to which an employee’s entitlement to paid leave days not yet taken must not perish with the death of the employee. Hence the recent judgment of the Federal Labor Court came as no surprise.

The differentiation between individual “types of paid leave” as indicated by the courts is of particular practical interest in this regard. It is at least undisputed that existing entitlements to the statutory minimum paid leave and entitlement to additional statutory paid leave for severely disabled persons are converted into a compensation claim of the respective heirs in the event of the death of the employee. However, it has not been conclusively clarified whether this also applies to additional paid leave granted by the employer in the employment contract or under collective bargaining agreements on top of the statutory minimum annual paid leave. In the case decided by the Federal Labor Court, there was no provision in the collective agreement according to which a potential heir would bear the risk of expiration for the additional paid leave. The Federal Labor Court, however, suggested that such an allocation of the expiry risk is generally possible.

 

Ogletree Deakin’s practical tip:

If employees are granted additional paid days beyond the statutory minimum paid leave or other additional paid leave days under statutory law (e.g. such as addition leave for severely disabled persons), employment contracts should differentiate between the statutory minimum paid leave and the additional paid leave days and explicitly exclude a compensation of additional paid leave in case of termination of the employment relationship (including the death of the employee). Furthermore, the employment contracts should explicitly stipulate that any paid leave taken is first credited against the statutory minimum paid leave days in order to reduce the number of paid leave days to be compensated in case of the termination of the employment relationship.