The German Federal Leave Act (Bundesurlaubsgesetz) provides that employees forfeit the right to claim outstanding holiday entitlement at the end of the calendar year or at the end of a specific transfer period; in other words, all holiday must be granted and taken beforehand. Under previous case law, this did even apply in the event that the employer declined an employee’s holiday request even though the request was made in a timely manner.

The Court of Justice of the European Union, however, has taken a different approach. In its ruling of 6 November 2018, the court decided that the regulation according to which employees automatically lose annual leave if they have not submitted a holiday request is not in line with European law. Following this decision, the Federal Labour Court, the highest labour court in Germany, developed its current case law and stated in its ruling of 19 February 2019 that the employer is obliged “to ensure in a concrete and fully transparent manner that the employee is actually in a position to take their paid annual leave by formally requesting them – if necessary – to do so”.

Therefore, the loss of annual leave is only permissible if the employer has specifically requested the employee to take annual leave before the end of the year and has informed them that annual leave will otherwise expire at the end of the calendar year or at the end of a specific transfer period. However, the Federal Labour Court did not specify in detail how and when employers should notify their employees. There has been no further case law in this regard; further clarification would be welcome and is anticipated within the next months. In the meantime, to mitigate the risk that annual leave is carried over into the following year and to minimise the build-up of accrued leave, employers should consider the following approach:

  1. employers should notify their employees during the year to ensure that they are still in a position to take any outstanding annual leave; and
  2. the notification should include the following:
  • The number of days of accrued holiday entitlement
  • Notification that all accrued holiday will be lost unless taken before the end of the calendar year or the specific transfer period
  • An instruction requiring employees to take the accrued holiday

This being said, the hurdles are now much higher for employers seeking to ensure that any untaken accrued leave is automatically forfeited. In future, employers will have to demonstrate that they are compliant with the ruling of the Federal Labour Court. In order to fulfil the new requirements outlined above, employers will face additional administrative duties and will need to review and modify their HR-related processes accordingly.