Germany: BAG ruling: Vacation entitlements during parental leave

The BAG confirmed that leave entitlements neither expire nor become time-barred during parental leave. How the employer can reduce leave entitlements with legal certainty.

BAG, judgment of 16.04.2024 - 9 AZR 165/23

No automatic forfeiture

In a recent case before the Federal Labour Court (BAG), an employee claimed compensation for 146 days of leave from the years 2015 to 2020. These leave entitlements had accrued almost entirely during her two maternity leave and parental leave periods but could not be taken as she was on parental leave until the employment relationship was terminated. After the employee terminated the employment relationship, she demanded compensation for the outstanding vacation days in the amount of EUR 24,932.42.

The BAG ruled that the leave entitlement had not lapsed. The employer had not issued an effective declaration of reduction in accordance with Section 17 BEEG, which meant that the entire leave entitlement was retained.

Prorating requires express legal declaration

The BAG emphasised that although an employer has the right to reduce leave entitlements by one twelfth for each full calendar month during parental leave in accordance with Section 17 para. 1 German Parental Leave Act (BEEG), this can only be done by means of a legal declaration. In the case in question, the employer only declared this reduction after the employment relationship had ended. However, the right to reduce leave presupposes that the entitlement to leave still exists when the declaration of reduction is received. It can therefore no longer be exercised if the employment relationship has ended, and the employee is entitled to vacation pay in lieu. This means that the employee is entitled to full compensation for vacation entitlement. A subsequent reduction after termination of the employment relationship is therefore no longer possible.

Vacation entitlements continue to accrue during of vacation entitlements

It is also important to note that both maternity protection and parental leave do not prevent the accrual of leave entitlements. In accordance with Section 24 Maternity Protection Act (MuSchG) and Section 17 para. BEEG, leave entitlements remain in place even during these periods of protection. The employer can only reduce the amount of leave during parental leave if a corresponding reduction declaration is submitted – this was not the case here.

The BAG determined that leave entitlements during maternity and parental leave do not expire or become time-barred according to the usual time limits. The statutory protection provides that the time limit regime of Section 7 para 3 Federal Vacation Act (BUrlG) is postponed to the relevant leave year after the end of parental leave. Therefore, the plaintiff's vacation entitlements from 2015 to 2017 could not expire.

Vacation pay after termination of the employment relationship

Pursuant to Section 7 para. 4 BUrlG, the plaintiff is entitled to compensation of all outstanding vacation entitlements. These were in the given case 146 days at the end of the employment relationship. The amount of compensation is calculated taking into account the gross monthly salary (EUR 3,700) and the number of vacation days to be compensated, which results in this case in a total of EUR 24,932.42. All leave entitlements continue to exist due to the non-existent declaration of reduction as well as the seamless maternity protection and parental leave. The last maternity protection period lasted until the end of the employment relationship.

Conclusion – clear instructions for employers

This ruling illustrates how important it is for employers to actively manage leave entitlements during parental leave. A reduction in leave entitlements requires a declaration. Without this, the entitlements remain in place and may have to be settled after the employment relationship ends. In addition, leave entitlements do not expire during parental leave as is usually the case, which employers should be aware of in order to avoid unnecessary costs.