Claim for payment in lieu of vacations for heirs?

Created by Nina Senninger | |  Labor Law

Any leave not taken by an employee may be “paid out” only upon termination of but not during the ongoing employment relationship.

If an employee died, the German Federal Labor Court (“BAG”) previously only recognized a payment in lieu of the leave entitlement if the deceased person’s entitlement for payment in lieu of vacations had already incurred, i.e. if such person was still alive at the end of his/her employment relationship. In November of last year, the European Court of Justice (ECJ) declared such jurisdiction to be contrary to EU law.

Thereupon, the BAG fundamentally changed its case law. It most recently decided (BAG – 9 AZR 45/16) that heirs are entitled to payment in lieu of leave not taken by the decedent if the employment relationship ends due to the decedent’s death.

The plaintiff – sole heir of her late husband (decedent) who had died in 2010 – claimed for compensation of his remaining leave entitlement of 25 working days (including additional leave due to severe disability) to which her husband had been entitled at the time of his death.

Pursuant to Art. 7 Sec. 4 BurlG (German Federal Leave Act), any leave not taken must be compensated. The BAG decided that the EU law interpretation of Art. 1 and Art. 7 Sec. 4 BurlG provides for a compensation claim even if the employment relationship ends due to the employee’s death. Any annual leave not taken or compensated prior to the employee’s death will become part of the estate as a component of the decedent’s assets.

In connection herewith, the BAG also decided that such claim for payment in lieu also includes additional leave for severely disabled persons as well as vacation claims under a collective agreement exceeding statutory minimum leave. The public service collective agreement – which was applicable in the relevant case – would not provide for the heirs having to bear the risk for the lapse of the extra leave pursuant to the collective agreement if the employment relationship ends due to the employee’s death.

So far, the decision is only available in the form of a press release; however, the decision is clear. In future, it must be taken into account that a deceased employee’s heirs may claim for a payment in lieu of the leave entitlement existing at the time of death.

This may seem to be meaningless, as vacations serve for the employee’s recovery and such vacation’s purpose can no longer be achieved after a person’s death. However, an employee’s vacations also include a financial factor and may as such be a small consolation for the heirs. 

Therefore, employers must from now on take into account that a claim for payment in lieu will arise irrespective of whether the employment relationship ends due to the employee’s resignation or death.

The heirs may assert such claims for payment in lieu within the three-year limitation period, unless shorter contractual or tariff-related periods should apply.

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