Under German law, the (mostly mandatory) provisions of the German Federal Vacation Act (Bundesurlaubsgesetz – BUrlG) constitute the basic legal framework for vacation entitlements. The Federal Vacation Act itself has not been changed for years. However, there are still a number of unanswered questions and controversial debates regarding vacation claims in Germany.

In 2019, the German Federal Labor Court (Bundesarbeitsgericht – BAG) had to deal on a regular basis with questions concerning vacation entitlements. Among others, several of the court’s decisions provided important clarifications about vacation entitlements during parental leave. At least in this respect, things are now somewhat clearer for employers.

General remarks on parental leave and vacation

Generally speaking, under German law, employees are entitled to vacation time provided there is an employment relationship between the parties and the statutory waiting period set forth in the BUrlG has passed. In other words, under German law, the entitlement to vacation does not require actual work performance, and thus, employees can accumulate vacation time, for example, during times of illness and dormant employment and while on release from work duties.

According to this principle, vacation entitlements also exist during periods of parental leave. However, the German Federal Benefit and Parental Leave Act (Bundeselterngeld- und Elternzeitgesetz – BEEG) gives employers the right to reduce annual vacation entitlement by 1/12 lf for every full month of parental leave so long as the employer gives appropriate notice to the employee.

Recent decisions of the Federal Labor Court on parental leave and vacation

So far in 2019, several BAG decisions have given further guidance on how the reduction of vacation entitlements for parental leave periods is to be implemented:

  • The BAG clarified that a notice of reduction by the employer can be given explicitly or implicitly, but, in any case, it must be in the form of a legal declaration of intent (rechtsgestaltende Willenserklärung), which must be received by the employee. The BAG ruled, therefore, that mere information about (shortened) vacation days in the employee’s paycheck is not sufficient to exercise the employer’s right for reduction.
  • The BAG also decided that a declaration of reduction is only effective if it is received by the employee at a time when vacation entitlements still exist. In other words, a reduction can only be implemented during ongoing employment. After the legal end of the employment, vacation entitlements under German law change to a financial claim for compensation. This financial claim cannot be further reduced, and the compensation must be paid in full.
  • The BAG also held that it is not possible to issue a declaration for reduction in advance and prior to the employee’s request for parental leave. Thus, including a reduction declaration in the employment agreement itself would not be lawful and would be without any effect.

In summary, in order to reduce vacation entitlements for periods of parental leave, employers in Germany are advised to provide a clear statement to the employee at an early stage. To be on the safe side, the declaration for reduction should be included in the employer’s letter to the employee confirming the term of parental leave.