(After all) No partial reduction of vacation entitlement in the event of short time work?

Nina SenningerLabor Law

Numerous employees have been working on short-time since the Corona pandemic. Now that the holiday season has started, employers are often faced with the question of how this affects the holiday entitlements of their employees who were sent on short-time work. Are employers entitled to reduce the holiday entitlements on a pro rata basis due to the short-time work ordered?

The Labour Court (ArbG) Osnabrück has ruled in several similar cases (reference 3 Ca 108/21 etc.) that vacation entitlements of the employees affected may not be reduced pro rata, unless short-time work was “zero”.

The employer ordered short-time work on a daily basis in his company due to the Corona pandemic. On the basis of a company agreement, short-time work could be terminated or reduced with a notice period of only two working days. However, the working time was not reduced to “zero”. 

After the employees returned to full-time employment, the employer reduced the vacation days proportionally in relation to the annual working days. The employer referred to decisions of the European Court of Justice (ECJ) on part time employees, a decision of the Federal Labour Court on sabbaticals as well as the decision of the State Labour Court Düsseldorf on short-time work “zero” which we have reported on in March. Furthermore, the employer was of the opinion that his company would be unable to operate after the phase of short-time work if employees could now take their full annual leave.

The employee argued that short-time work was not comparable to part-time employees or employees on a sabbatical and insisted on the full vacation entitlement. The employee argued that the short-time work that was ordered and changed again on short notice was not a predictable and freely available free time that he can use at his discretion.

The Labour Court Osnabrück has fully upheld the lawsuit and obliged the employer to credit the employee’s vacation account with the reduced vacation time.

The Labour Court is of the opinion that the pro rata reduction is illegal. Holiday leave according to the Federal Holiday Act (Bundesurlaubsgesetz – BUrlG) is granted for the pure existence of an employment relationship irrespective of the performance of a concrete work activity. Since the employment relationship was not suspended for the duration of the short-time work, a pro rata vacation reduction is not justified. There is no comparable legal situation to the law on part-time work or other permanent interruptions of the mutual obligation to perform from the employment relationship, such as in the event of a sabbatical, since the working time is not reduced to “zero”.

The Labour Court rather sees a comparability with regard to suspension situations such as parental leave according to the German Federal Remuneration and Parental Leave Act (BEEG), for which a pro rata reduction of vacation entitelment is stipulated by law. The legislator could have also regulated this in the event of short-time work, but failed to do so. Instead, the legislator stipulated in Art. 11 sec. 1 sent. 3 German Federal Vacation Act (BUrlG), that short-time work shall not lead to a reduction of the holiday pay. The legislator’s intention was to express that short-time work should not lead to a reduction in earnings with regard to holiday pay.

In contrast to short-time work “zero”, the Labour Court has denied the pro rata reduction due to short-time work being ordered on short notice and due to the possibility of early termination or reduction of the short-time ordered with a notice period of two working days. Employees have not been able to realise their recuperation leave on a pro rata basis as a result.  A short notice of short-time work is permissible but does not lead to a situation similar to a recuperation leave.

The Labour Court considered the employer’s argument that employees could take their entire annual leave after the end of short-time work and thereby obstruct business operations to be irrelevant. The employee was legally entitled to the vacation entitlement and the alleged obstruction of the business operations was pure speculation.

Practical Tip

So far, only the press release on the Labour Court’s decision Osnabrück is available. However, the press release clearly shows, that the appeal to the Regional Labour Court was admitted due to the importance of the case. It remains to be seen whether the Regional Labour Court will follow the legal opinion of the Labour Court Osnabrück or allows the reduction of vacation entitlements.

In the decision already quoted above, the Regional Labour Court Düsseldorf considered the pro rata reduction of the vacation entitlement in the case of short-time work “zero” to be legal. Initially, this does not contradict the decision of the Labour Court Osnabrück, as there is no short-time work “zero” and the decision is based on whether the vacation leave has “so to speak been realised on a pro rata basis” as a result of the granted short-time work on a daily basis.

However, according to the case law of the European Court of Justice (EuGH) entitlements on paid annual leave are principally to be calculated on the basis of the periods of work actually performed on the basis of the employment contract. As a result of the ordered short-time work on a daily basis – as in the present decision of the Labour Court Osnabrück – the days with an obligation to perform work and thus the required recovery time are reduced. According to this opinion, a reduction of the vacation entitlement would be possible.

The question of vacation reduction in the event of short-time work is most relevant in practice. It becomes clear, that the legal situation needs to be clarified by law or by the highest court. Further decisions on this question remain to be seen. We will keep you updated!

Do you have question on this subject or on any other employment contract issue? Please do not hesitate to contact us!

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