Beware of Irrevocable Release from Work with Blanket Crediting of Vacation and Overtime

A recent decision by the Higher Labor Court of Lower Saxony (Landesarbeitsgericht Niedersachsen) illustrates why employers should refrain from issuing unilateral, irrevocable, and non-specific releases from work in connection with a simultaneously declared termination.

The Facts: Release from Work Following Ordinary Termination

In the case at hand, the claimant was employed by the defendant under a fixed-term employment contract expiring on 31 May 2025. The defendant terminated the employment relationship by way of ordinary termination in a letter dated 13 March 2025, effective 15 April 2025. On the same date, the defendant provided the claimant with a separate letter, releasing him from work “irrevocably with immediate effect, with any remaining vacation entitlement and overtime to be credited.” After the claimant filed an unfair dismissal claim, the defendant acknowledged the continuation of the employment relationship until the original fixed-term end date and, by letter dated 24 March 2025, requested the claimant to resume work as of 25 March 2025.

The claimant accepted this acknowledgment but did not return to work at any point before the fixed term expired.

With his claim, the claimant sought payment of outstanding wages, including vacation pay, for the period through to the end of the fixed term. He argued that the defendant’s irrevocable release from work had effectively relieved him of any obligation to work until the employment relationship ended on 31 May 2025.

At first instance, the Labor Court of Oldenburg (Arbeitsgericht Oldenburg) confirmed the continuation of the employment relationship until the end of the fixed term and awarded the claimant remuneration up to 24 March 2025. The remainder of the claim was dismissed. The claimant appealed.

The Decision: Blanket Vacation Crediting Can Bind the Employer

The appeal was partially successful. The Higher Labor Court of Lower Saxony (judgment of 16 March 2026, case no. 4 SLa 854/25) awarded the claimant back pay for default in acceptance (Annahmeverzugslohn), including vacation pay, for the period from 25 March 2025 to 15 April 2025. The appeal was otherwise dismissed.

Unilateral Release Does Not Constitute an Offer to Enter Into a Release Agreement

The court did not recognize any broader claim based on – as argued by the claimant – a release agreement (Erlassvertrag). According to the court, a unilateral release from work generally constitutes only an employer’s declaration that it refuses to accept the employee’s performance of work, thereby triggering default in acceptance.

In the court’s view, such a declaration cannot – even taking into account all of the circumstances – be construed as an offer by the defendant to enter into a release agreement that would have permanently extinguished the claimant’s obligation to work.

However, due to its connection with the ordinary termination, the release was limited to the expiry of the ordinary notice period on 15 April 2025. The defendant was therefore in default of acceptance until that date, and the claimant was entitled to vacation pay and back pay for default in acceptance through that point.

Risk for Employers: Vacation in Excess of Entitlement

In the court’s view, by granting an “irrevocable release with crediting of remaining vacation,” the defendant had effectively granted the claimant his outstanding vacation without having to specify the precise vacation period. However, because the defendant failed to specify the exact dates, the court held that the defendant must be treated as if it had granted the claimant vacation for the entire period through 15 April 2025 – even if the claimant’s actual remaining vacation entitlement would not have covered that duration. This, the court stated, was a risk assumed by the defendant. Consequently, the defendant’s instruction that the claimant return to work as of 25 March 2025 was ineffective, since the defendant was bound by the vacation grant through 15 April 2025 and could not recall the claimant from approved vacation.

Leave to appeal to the Federal Labor Court (Bundesarbeitsgericht) was granted given the fundamental significance of the issues involved.

Key Takeaway: Precise Release Declarations Avoid Legal Pitfalls

This ruling makes clear that an irrevocable release from work with vacation crediting simultaneously constitutes a binding grant of vacation. This binds the employer and precludes any recall of the employee from approved leave. Therefore, particularly where a termination may be challenged, employers should specify the vacation period precisely and make only that period irrevocable which is strictly necessary to fulfill the vacation entitlement. Failing to do so risks granting employees more vacation than they are actually entitled to – and having to pay vacation pay accordingly.

In addition, release clauses should always be drafted with clear and unambiguous language so that a unilateral release declaration can be clearly distinguished from a potential release agreement.

If you have any questions regarding employee releases from work, please do not hesitate to contact us.