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German court tightens rules on unused holiday leave expiration

Employers must now send personalized warnings—or risk paying out old leave. A landmark ruling reshapes how companies manage employee holidays.

,   and  Administrator
2 min read
The image shows an old German 100 Reichsmark banknote from 1933, with the text "Metallgesellschaft...
The image shows an old German 100 Reichsmark banknote from 1933, with the text "Metallgesellschaft Aktie" printed on it.

Previous Rules on Leave Forfeiture

German court tightens rules on unused holiday leave expiration

Only after employers had fulfilled their obligations—known as the duty to notify and prompt—could unused leave expire, provided employees had not taken their leave of their own accord.

What Applies to Employees on Long-Term Sick Leave?

Until now, Germany's Federal Labour Court (Bundesarbeitsgericht, BAG) had left open whether these obligations also applied to long-term sick employees.

In a landmark ruling at the end of 2022, the BAG—citing the EU-compliant interpretation of Section 7(1) and (3) of the Federal Leave Act (Bundesurlaubsgesetz)—held that an employee's entitlement to leave from a year in which they actually worked before being prevented from taking leave due to health reasons generally expires only after a 15-month carryover period, provided the employer had promptly informed the employee of their leave entitlement and the risk of forfeiture, thereby enabling them to take their leave.

When Do Leave Claims Become Time-Barred?

Previously, the BAG had not ruled on the statute of limitations for leave claims, meaning employers could rely on a three-year limitation period. Claims older than three years were considered time-barred—even if employers had failed to inform employees about their remaining leave.

The BAG has now clarified that unused leave does not automatically become time-barred after three years. For the limitation period to apply, employers must first have explicitly notified employees of their specific leave entitlements and the impending risk of forfeiture, while also urging them to take their leave. Only if an employee then fails to act and claim their leave will the entitlement expire or become time-barred.

Important Note for Employers

Employers must fulfill their duty to inform all employees—including those on long-term sick leave—of the impending forfeiture of their leave entitlements in a timely manner. If employees still have outstanding leave from previous years, employers should also notify them of these claims, along with the three-year limitation period.

Key requirement: Employers are obligated to inform each employee of the exact number of leave days they are entitled to, as well as the deadline for forfeiture or the expiration of the claim, alongside an explicit prompt to take the leave within the specified timeframe. A generic notice stating that leave must be taken within the calendar year or by March 31 of the following year is not sufficient.

To document compliance with these notification and prompting obligations, employers should use written communication (e.g., email or letter) and file a corresponding record in the employee's personnel file.

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