Holiday Entitlement in German Labor Law
Holiday entitlement is a central issue in German labor law and concerns every employee. The Federal Vacation Act (BUrlG) stipulates that every employee is entitled to paid leave to recover from work and regain strength. The statutory minimum holiday entitlement amounts to 24 working days per calendar year, which corresponds to four weeks of leave in a five-day workweek. This regulation applies regardless of the type of employment relationship and ensures the rest and recuperation of employees. Therefore, holiday entitlement is not only an individual right of each employee but also an important component of health protection in the workplace. In this article, we examine the legal foundations, the calculation of holiday entitlement, and the specifics surrounding the minimum holiday entitlement so that both employees and employers are well informed.
Legal Background
The legal framework for holiday entitlement is set out in the Federal Vacation Act (BUrlG). This law establishes that every employee is entitled to an annual minimum holiday of 24 working days. In many cases, this entitlement is extended in favor of employees through collective agreements or individual employment contracts. The Federal Labor Court (BAG), based in Erfurt, is the highest authority in labor jurisdiction responsible for the interpretation and further development of holiday law. Labor courts regularly resolve disputes concerning holiday entitlement, such as issues relating to the calculation, transfer, or compensation of vacation days. The statutory minimum holiday entitlement is a mandatory protective provision that cannot be altered to the detriment of employees. The labor law case law of the BAG ensures uniform application of the Federal Vacation Act and provides guidance to employers and employees in handling holiday claims.
Federal Labor Court Judgment of June 3, 2025 – Case No. 9 AZR 104/24
The Federal Labor Court (BAG) clarified in its judgment of June 3, 2025 (Case No. 9 AZR 104/24) that an employee cannot validly waive their annual minimum holiday entitlement. This applies even if the waiver is declared in the context of a judicial settlement concerning the termination of the employment relationship. Accordingly, the employee cannot effectively relinquish their minimum holiday entitlement.
As the court of revision in the labor court instance hierarchy, the Federal Labor Court decides on legal questions addressed by several senates, including the Grand Senate. The senates of the Federal Labor Court include professional judges, lay judges, female judges, and representatives of female employees to ensure balanced and appropriate labor law rulings.
The statutory minimum holiday serves the employee’s recuperation. The BAG reinforced this protective function of the minimum holiday with its decision. Outstanding vacation days cannot be generally declared settled in settlement negotiations or termination agreements. This applies at least to the minimum holiday. For holiday claims exceeding the minimum holiday, the situation may differ, according to the labor law firm MTR Legal Rechtsanwälte, which advises clients including on labor law.
Termination of Employment Relationship by Judicial Settlement
In the underlying case before the BAG, the plaintiff had been employed for many years as a plant manager. From January 1, 2023, he was continuously incapacitated and was therefore unable to take his statutory minimum holiday for 2023. In March 2023, the parties concluded a judicial settlement in which they agreed to terminate the employment relationship on April 30, 2023, and the payment of severance.
Holiday entitlements may not only be legally regulated but also expanded or specified by individual employment contracts or collective agreements. Many employment relationships contain additional provisions on vacation days, leave of absence, or special leave in collective agreements or employment contracts.
Clause 7 of the settlement included the following provision: “Holiday entitlements are granted in kind.” This wording was evidently intended to clarify that outstanding holiday entitlements would no longer be compensated separately. Nevertheless, after terminating the employment relationship, the employee claimed compensation for seven days of statutory minimum holiday for 2023 (approximately 1,615 euros). The employer argued that the settlement had conclusively resolved all holiday claims, including compensation claims.
Invalid General Settlement Clause
The lower courts upheld the claim, and the BAG dismissed the employer’s appeal. It found that the clause “Holiday entitlements are granted in kind” in the judicial settlement is invalid insofar as it provides for a waiver of the statutory minimum holiday or its compensation. Such a clause violates § 13 paragraph 1 sentence 3 of the Federal Vacation Act (BUrlG), which establishes the minimum holiday as mandatory. Consequently, the clause is null and void according to § 134 of the German Civil Code (BGB).
The existing legal order and statutory labor law provisions explicitly prohibit waivers of statutory minimum holiday through general clauses in judicial settlements. These rules exist to protect employees and are binding on all labor courts.
The Federal Labor Court (BAG) further clarified that neither the statutory entitlement to paid vacation nor a future entitlement to compensation for the statutory minimum vacation arising upon termination of the employment relationship can be excluded or restricted in advance – not even by a court settlement. This applies even if it is already certain at the time of concluding the court settlement that the employee can no longer take their statutory minimum vacation due to illness.
According to Article 7(2) of Directive 2003/88/EC of the European Parliament and of the Council of 4 November 2003 concerning certain aspects of the organization of working time, paid minimum leave may not be replaced by a financial compensation, except in the case of termination of the employment relationship. In an existing employment relationship, the employee may not waive their paid leave, even against payment of financial compensation, according to the BAG.
Obviously unlawful regulation
The court also stated that the employee does not act against the principles of good faith if they rely on the invalidity of the provision agreed upon in the court settlement. The employer must not rely on the existence of an obviously unlawful provision.
The ruling clarifies that the statutory minimum vacation is an indispensable protective norm. It must not be restricted, disposed of, or “compensated” to the detriment of the employee by contractual provisions – neither by settlement agreements, termination agreements, nor other arrangements – as long as the employment relationship still exists. General release clauses such as “vacation claims are granted in kind” or “all claims are settled” are ineffective if they also cover the statutory minimum vacation. Employers must therefore use clear and differentiated wording in termination settlements and termination agreements, as unclear regulations can lead to uncertainties regarding the entitlement to vacation compensation.
Vacation payment
Vacation payment is generally only permitted under German labor law in exceptional cases. According to the Federal Vacation Act (BUrlG), vacation must be granted in kind, that is, by actual release from work. A payment in lieu of vacation entitlement is only permissible if the employment relationship ends and the employee can no longer take their vacation. In such a case, a claim to vacation compensation arises, based on the average earnings of the last 13 weeks before termination of the employment relationship. The Federal Labor Court (BAG) has made clear in numerous decisions that payment during an ongoing employment relationship is not possible. Employers and employees should therefore clarify early on how to handle outstanding vacation claims to avoid later disputes. The BAG’s jurisprudence ensures that legal requirements for vacation compensation are consistently observed and employee protection is maintained.
No protection by court settlement
Every agreement should clearly state that the minimum vacation has either already been granted or will be properly compensated after termination, as these risks especially exist upon termination of employment relationships. Otherwise, there is a risk that employees will later successfully sue for vacation compensation, and employers will have to bear compensation, interest, and legal costs. Even a court settlement does not provide protection, as the BAG ruling demonstrates.
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