Germany: Holiday entitlement during periods of short-time work

Update: LAG Düsseldorf’s decision confirmed by the Federal Labour Court

In its decision of 30 November 2021 (ref. 41/21), the Federal Labour Court (BAG) confirmed the decision of the Düsseldorf Higher Labour Court (LAG Düsseldorf) of 12 March 2021. The plaintiff's appeal to the Ninth Senate of the BAG has not been successful.

The press release of the BAG literally states: “If individual working days are completely cancelled due to short-time work, this must be taken into account when calculating annual leave.” If, according to the employment contract, an employee’s working time is distributed over fewer or more than six working days in a calendar week, the number of days of leave is in principle to be calculated taking into account the working rhythm relevant for the leave year in order to ensure an equivalent duration of leave for all employees. The annual leave entitlement could be calculated using the following formula:

Holiday entitlement (year) = 24 working days x number of days with work obligation ÷ 312 working days

According to the BAG, the cancellation of entire working days due to short-time work justifies a recalculation of the holiday entitlement during the year. Therefore, working days that are completely cancelled due to short-time work agreed in individual contracts are not to be equated with periods of compulsory work, neither under national law nor under European Union law. Accordingly, in the above formula, the days on which short-time work was “zero” are not to be taken into account in the multiplier “number of days with work obligation”.

In future, employers are therefore advised to thoroughly assess the holiday entitlements of their employees when short-time work “zero” was ordered. In particular, since in view of the COVID-19 pandemic many employers were forced to order short-time work “zero”, the BAG’s clarifying decision is to be welcomed. The parties to the employment relationship thereby gain certainty as to how holiday entitlement is to be calculated in the case of short-time work. It is important to note, however, that the BAG’s decision refers exclusively to the case of short-time work “zero”. In the event of only a partial reduction of working hours in the course of short-time work, the corresponding working days with reduced working hours must be taken into account when calculating the holiday entitlement.

Germany: Holiday entitlement during periods of short-time work (as of March 2021)

Short-time work has been on everyone's lips, especially since the beginning of the Corona pandemic. Last year, more employees than ever were on short-time work. Often, working hours were even reduced to "zero" during short-time work. As a result, many employers will be wondering about the impact of short-time work on employees' holiday entitlements. Under German law, this question is still controversial. The German Federal Holiday Act (Bundesurlaubsgesetz (BUrlG)) does not contain any clear regulation on holiday entitlement during short-time work.

Case law of the ECJ

In 2012, the European Court of Justice (ECJ) ruled that, at least under European law, employers do not have to grant their employees any holiday entitlement in the case of short-time work "zero" (judgements of 8 November 2012, ref.: C-229/11, C-230/11 as well as 13 December 2018, ref.: C-385/17). During short-time work "zero", there was no obligation to perform work, so that employees would not acquire any holiday entitlement. Hence, there was no conflict with the European minimum leave entitlement under Article 7(1) of Directive 2003/88/EC.

However, the decisions of the ECJ were limited to examining the compliance of a reduction of holiday entitlements during short-time work "zero" with European law. This did not yet create legal certainty for German employers, as European law only guarantees a minimum level of protection for employees. German law could exceed this protection and prohibit a reduction of holiday entitlements during short-time work "zero".

Decision of the Düsseldorf Higher Labour Court

In line with the case law of the ECJ, the Düsseldorf Higher Labour Court (LAG Düsseldorf) has now also deemed the reduction of holiday entitlements in the case of short-time work "zero" to be permissible (judgement of 12 March 2021, ref.: 6 Sa 824/20, so far only available in the German press release).

As a result of the Corona pandemic, short-time work "zero" was repeatedly ordered for the plaintiff at the defendant from April to December. As a result, the employer granted the plaintiff only a pro rata holiday entitlement. The plaintiff was convinced that the short-time work had no influence on her holiday entitlement. Short-time work was not at the employee's request and was not free time. Moreover, the employer could terminate the short-time work at any time at short notice, so that the time off could not be planned unrestrictedly. The plaintiff therefore sought a declaration that she was entitled to the unreduced holiday for 2020.

The LAG Düsseldorf rejected the claim, as did the Essen Labour Court in the first instance (ruling of 6 October 2020 - 1 Ca 2155/20). During the periods of short-time work "zero", the plaintiff had not acquired any holiday entitlements according to Section 3 BUrlG. Therefore, she was only entitled to the reduced amount of annual leave in 2020. The LAG Düsseldorf justified the reduction of holiday entitlement by stating that the recreational purpose of the leave presupposed an obligation to work. Since the mutual obligations to carry out work were suspended during short-time work "zero", an employee on short-time work was to be treated like a temporary part-time employee whose holiday entitlement was also to be reduced on a pro rata basis.

The LAG Düsseldorf allowed the appeal to the Federal Labour Court (Bundesarbeitsgericht).

Effects on labour law practice

The decision of the LAG Düsseldorf is to be welcomed. The purpose of statutory holiday entitlement is recovery from work. Therefore, the holiday entitlement presupposes the employee's obligation to work. However, at least in times of short-time work "zero", there is no obligation to perform work, so that recovery is not required for these times either. The situation during short-time work can be compared to part-time work. As the LAG Düsseldorf correctly states in the press release, there is neither a special regulation for short-time work nor does anything else result from the provisions of the BUrlG.

It is particularly controversial and as yet unresolved whether the aforementioned approach can also be transferred to cases of "cyclical" short-time work depending on market conditions - currently in particular in view of the Corona pandemic. According to the decision of the LAG Düsseldorf, the fact that the short-time work is caused by the Corona pandemic does not change the aforementioned considerations. Since the LAG Düsseldorf allowed the appeal, the final decision of the Federal Labour Court (Bundesarbeitsgericht) remains to be seen at this point in any event.

As far as can be seen from the press release, the LAG Düsseldorf only dealt with the question of reducing holiday entitlements in the case of "zero" short-time working. In this context, the calculation of holiday entitlements is therefore unresolved and still controversial, in cases where the work obligation is only reduced on a pro rata basis during short-time work. Considering the decision of the LAG Düsseldorf, there is evidence to suggest that a pro rata calculation of the holiday entitlement should also be made in this case, applying the principles of a part-time employment relationship.

At this point, it is still not clarified whether the holiday entitlement during short-time work only arises on a pro rata basis by law or whether the employer must declare the pro rata reduction of the holiday entitlement to the employee. Employers are therefore recommended to include provisions on the pro rata reduction or lapse of holiday entitlements in agreements on the introduction of short-time work until the legal situation has been settled unequivocally. Even if the provisions of the BUrlG cannot be waived by a contractual provision, a clarification in the agreement is certainly advisable. In the future, a corresponding provision should be included directly in the employment contract or, alternatively, be taken into account in a works agreement.