Vacation law: Employer notification as a prerequisite for vacation forfeiture

Imagine you've worked hard for years, accumulated overtime , and forgone your well-deserved vacation out of loyalty to the company or due to a heavy workload . Until now, many employers were confident that these old claims would simply expire after three years . A quick glance at the calendar, a reminder of the passage of time, and the employees' vacation entitlements seemed to vanish into thin air. But on December 20, 2022, the Federal Labor Court (BAG) issued a ruling that fundamentally shifted the balance of power between employers and employees and sent shockwaves through HR departments nationwide. The central message we, as a law firm, are analyzing for our clients today is this: Employers who remain silent will pay – potentially even for vacation claims dating back years.

The old legal situation and the winds of change from Luxembourg

Previously, German vacation law was considerably less employee-friendly compared to current case law . According to the Federal Vacation Act, the principle was that vacation had to be taken in the current calendar year. Carrying it over to the next year was only possible in exceptional cases, and even then, the entitlement expired no later than March 31st of the following year. Furthermore, the statute of limitations under the general civil law rules of Sections 195 and 199 of the German Civil Code (BGB) seemed to be a last line of defense for employers to avoid financial provisions for long-standing vacation entitlements. However, in 2018, the European Court of Justice (ECJ) set new standards. The Luxembourg judges clarified that the forfeiture of vacation time is not automatic . They made the loss of the entitlement contingent on the employer having actually enabled the employee to take their vacation through adequate information.

The obligation to cooperate: More than just a nice gesture

The Federal Labor Court has now fully transposed this European understanding into national law. This is referred to as the employer's duty to cooperate . Specifically, this means that the employer must explicitly and promptly inform their employees that they still have vacation entitlements and that these will expire if not claimed within a certain period. This is not merely an ancillary obligation, but a prerequisite for the statute of limitations to begin . Only when the employer has fulfilled this duty to inform does the three-year limitation period under Section 195 of the German Civil Code (BGB) even begin to run. In our consulting practice, we have observed that many companies have underestimated the implications of this "duty," as failure to comply can now lead to substantial financial claims.

What this verdict means for your future

The practical consequences of this decision are enormous for both sides. We strongly advise employees to check their old payslips and vacation records. Were you ever formally notified in the past that your remaining vacation days were about to expire? If not, there's a good chance you can still claim these entitlements today – either as time off or, in the case of leaving the company, as financial compensation for unused vacation days according to Section 7 Paragraph 4 of the Federal Vacation Act (BUrlG ). On the other hand, employers must now act proactively . To protect themselves from a wave of lawsuits and large back payments, legally sound notification systems must be implemented. The statute of limitations is no longer an automatic safeguard, but rather a tool that is only activated through active communication from the employer.

Conclusion of our law firm

The Federal Labor Court's ruling of December 20, 2022, marks a milestone for employee protection in Germany. The principle of "no notice – no deadline" overrides the traditional application of limitation periods to vacation entitlements if the employer remains inactive. For legal practice, this means that vacation entitlements are now significantly more secure than just a few years ago . Both employers and employees should carefully review their existing contracts and previous correspondence to avoid unpleasant surprises or to successfully enforce legitimate claims.