No vacation waiver through court settlement

BAG of 03 June 2025, Ref. 9 AZR 104/24

In its decision of 3 June 2025, the Federal Labor Court further clarified that the parties to an employment contract cannot waive the statutory minimum leave. Accordingly, an employee in an existing employment relationship cannot waive their statutory minimum leave by a court settlement of facts if there is no uncertainty that is dispelled by the settlement. So far, only the press release of the decision is available.

Background

According to Section 13 (1) sentence 3 BUrlG, the provisions of the Federal Leave Act cannot be deviated from to the disadvantage of employees. An agreement in which an employee waives statutory vacation entitlements is therefore invalid.

Agreements after the end of the employment relationship are possible - after the entitlement to compensation of the vacation days has come into existence.

However, the prevailing opinion to date has been that it is always possible to reach an agreement on facts and thus exclude any future claims for vacation compensation. Accordingly, if the parties agreed that the full vacation entitlement had already been granted and taken, there was no longer any entitlement to vacation compensation at the end of the employment relationship.

Facts of the case

The parties were in dispute about the compensation of seven days of statutory minimum leave for the year 2023. The plaintiff was employed by the defendant from 1 January 2019 to 30 April 2023. From the beginning of 2023 until the end of the employment relationship, the plaintiff was unable to work due to illness.

A legal dispute arose between the parties at the beginning of 2023. The parties ended this legal dispute on 31 March 2023 with a settlement that provided for the termination of the employment relationship on 30 April 2023 against payment of a severance payment. With regard to any vacation entitlements, the parties agreed on the following wording: "Vacation entitlements are granted in kind."

The plaintiff's representative had already expressed doubts about the validity of the vacation provision when the settlement was negotiated. However, the defendant was not prepared to make any further concessions and insisted on the wording.

Following the termination of the employment relationship, the plaintiff demanded that the defendant pay him € 1,615.11 in vacation compensation for the vacation days attributable to the 2023 calendar year.

The Decision

Like the lower courts, the BAG ruled in favor of the plaintiff. The agreement at issue here that vacation entitlements were granted in kind constituted an impermissible exclusion of the statutory minimum vacation entitlement and was therefore invalid. This also applies if - as here - it is already certain that the employee will no longer be able to take the statutory minimum leave due to illness-related incapacity to work. It follows from Directive 2003/88/EC that the vacation entitlement can only be replaced by financial compensation upon termination of the employment relationship. In the existing employment relationship, the employee may therefore not "waive" the statutory minimum leave in return for, and certainly not without, financial compensation.

Clause 7 of the court settlement at issue here cannot be regarded as a - fundamentally possible - settlement of facts to which Section 13 (1) sentence 3 BUrlG would not apply. Such a settlement presupposes that there is uncertainty about the actual conditions of a claim. There was no such uncertainty in the case at issue here: The plaintiff was unfit for work during the entire period in which the employment relationship existed in the calendar year 2023. He could therefore simply not have taken the vacation entitlement to which he was entitled.

The BAG also clearly rejected the defendant's objection of abuse. The defendant could not rely on the existence of an obviously unlawful provision.

Practical tip

Whether a comparison of facts is suitable for safeguarding the interests of the parties must be examined on a case-by-case basis in future - the BAG has rejected the blanket invocation of such a settlement of facts.

If a factual settlement is not possible due to the lack of uncertainties regarding the basis of the claim, the expected vacation compensation claim must be taken into account when negotiating the severance payment. For example, the severance payment could be reduced by the expected vacation compensation. If it is planned to use up the vacation as part of an irrevocable leave of absence, the severance payment regulation could also provide for an automatic reduction in the event of unexpected illness.

In any case, in future it will be more important than ever to find individual solutions for dealing with outstanding vacation entitlements.