Vacation Rights Remain Intact in Court Settlements: Federal Labor Court Ruling
Absence of mandatory leave relief under consideration
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Employees can still hold onto their legally mandated minimum vacation time even in the wake of a court settlement terminating their employment contract. This was the decision of Germany's Federal Labor Court in Erfurt, in a case originating from North Rhine-Westphalia. The court stated, "In an ongoing employment relationship, an employee cannot waive their statutory minimum vacation entitlement through a court settlement" (9 AZR 104/24).
This dispute concerned seven days of statutory minimum vacation compensation. An operations manager was employed but was unable to work due to illness from the start to the end of his employment. After a court settlement, his employment concluded with a severance payment of 10,000 euros. The settlement reported vacation claims as "granted in kind."
The former operations manager lodged an appeal, demanding payment of 1,615 euros plus interest for the remaining seven days of statutory minimum vacation, arguing that the vacation waiver agreed upon in the settlement was void. Both lower courts, including the Cologne Higher Labor Court, approved his claim. However, the Federal Labor Court has now overturned the employer's appeal.
The petitioner is entitled to compensation for his unworked statutory minimum vacation from 2023 under the Federal Vacation Act, ruled the judges. An agreement that vacation claims are granted in kind is considered invalid for excluding minimum vacation rights.
German labor law highly values employees' vacation rights, viewing them as a critical aspect of employment law aimed at ensuring employee well-being[1][2]. Accordingly, voluntary agreements to waive or reduce vacation entitlements below the statutory minimum are generally not legally binding. Such discussions can, however, lead to flexible vacation arrangements, like annual leave purchase schemes, but these must still adhere to the statutory minimum[5].
In situations involving agreements that potentially infringe upon significant employment rights, court approval might be needed, particularly if it pertains to a settlement potentially unfavorable to the employee[3]. To safeguard their interests, employees considering court settlements should consult legal experts for advice on permissible agreements under German labor law.
The right to statutory minimum vacation entitlements, as protected by community law, cannot be forfeited through a court settlement in an ongoing employment relationship. In light of this ruling, the former operations manager is entitled to financial compensation for his unworked statutory minimum vacation from 2023, as agreements that vacations claims are granted in kind are invalid for excluding minimum vacation rights in the context of business and employment.
