No lapsing of holiday entitlement upon the death of an employee

Contrary to the previous case law of the Federal Labour Court (BAG), the European Court of Justice (ECJ) has decided that the employee’s entitlement to paid minimum holiday does not expire upon the death of the employee. Rather, the entitlement to compensation is inheritable.

The claimant took legal action against the employer of her deceased husband to obtain compensation for holiday entitlement. Her husband had been unfit for work between 2009 and his death in November 2010 (with interruptions) as a result of a serious illness. At the time of his death, he indisputably had an outstanding annual holiday entitlement of 140.5 days. The claimant demanded compensation from the defendant for the holiday entitlement not taken by her husband. The defendant rejected the claim and expressed doubts concerning the inheritability of the compensation.

Submission of the LAG Hamm

The State Labour Court Hamm was the appeal instance in this matter and submitted the matter to the ECJ for a preliminary decision on whether EU law permits national legal regulations or customs under which the claim to paid annual holiday expires upon ending of the employment relationship through death of the employee, without creating an entitlement to compensation for holiday not taken. The State Labour Court also raised the question of whether any such compensation is dependent on a prior application by the person concerned.

Holiday not taken due to illness must be the subject of financial compensation

The ECJ answered the questions submitted in the negative, as complete expiry of this entitlement upon the death of the employee is incompatible with the Working Time Directive (Directive 2003/88/EC), which provides for an entitlement to minimum annual paid holiday of four weeks. In the opinion of the ECJ, the entitlement to paid annual holiday is a particularly important principle of social law, from which deviation should not be readily permitted. In addition, it should be noted that the entitlements to annual holiday and payment during holiday constitute two aspects of a single entitlement. Against this background, the Court of Justice has also already decided that a violation of EU law is given if, upon ending of the employment relationship, the long-term sick do not receive remuneration for holiday not taken due to illness.

Not even death must result in complete loss of the holiday entitlement

The practical effectiveness of the holiday entitlement must also be ensured through financial compensation in the event of ending of the employment relationship through the death of the employee. In the opinion of the ECJ, if the obligation to pay out annual holiday entitlements were to lapse upon ending of the employment relationship through the death of the employee, the imponderable death of an employee would result in retrospective complete loss of the entitlement to paid annual holiday. Against this background, the decision of the ECJ at hand makes it clear that EU law conflicts with national legal regulations or customs which exclude compensation for paid annual holiday not taken in the event of the death of the employee.

Payment for holiday is not dependent on a prior application by the person concerned

The ECJ states furthermore that compensation for holiday in such cases is not dependent on the person concerned having submitted an application in advance. The reason for this is that the Working Time Directive (Directive 2003/88/EC) does not impose additional preconditions for the establishing of the entitlement to financial remuneration for paid minimum annual holiday, other than the ending of the employment relationship.

Summary

Under the previous case law of the Federal Labour Court (BAG), the holiday entitlement of an employee expired upon his/her death and in particular was not converted into an inheritable claim for compensation under Section 7 IV BUrlG (Federal Holiday Act) (BAG, judgment dated 20.9.2011, 9 AZR 416/10, BAG judgment dated 12.3.2013, 9 AZR 532/11). Following the decision of the ECJ, the previous legal practice in Germany concerning statutory minimum holiday is no longer tenable. Given corresponding contract formulation, only the contractual additional holiday entitlement can be excluded from compensation in the event of the death of the employee.