Background of the Federal Labor Court decision regarding waiver of vacation in settlement agreements
In its decision dated June 4, 2024 (Case No.: 9 AZR 104/24), the Federal Labor Court (BAG) provided a groundbreaking clarification for employment relationships concerning the waiver of vacation entitlements within the scope of a settlement agreement. The ruling specifies under which circumstances any waiver of vacation claims during an ongoing employment relationship is legally permissible.
Legal framework: Inalienability of vacation entitlement
Statutory foundations
Statutory minimum vacation is anchored in the Federal Vacation Act (BUrlG) and is afforded special labor law protection. According to § 13 para. 1 sentence 3 BUrlG, a waiver of statutory minimum vacation is generally excluded during an ongoing employment relationship. This protection serves to safeguard the recuperative function of vacation—a central concept of vacation law.
Procedural structuring options
In employment law disputes, it is not uncommon for parties to enter into a settlement agreement that also addresses any outstanding vacation claims. However, there is particular uncertainty as to whether a waiver through settlement can be recognized with respect to statutory vacation, insofar as the employment relationship continues.
Content and scope of the BAG decision
Core of the decision
With its most recent decision, the BAG made it clear that a waiver of statutory minimum vacation through a settlement agreement is not permissible in an ongoing employment relationship. Even a corresponding formulation in a court settlement is, in the BAG’s view, invalid insofar as the cited vacation entitlement concerns statutory minimum vacation and the employment relationship is not terminated.
Distinction between statutory and contractual vacation entitlements
It is particularly noteworthy that the BAG differentiates between the non-negotiable statutory minimum vacation and additional contractual or collectively agreed vacation entitlements. A waiver in a settlement agreement can at most relate to voluntary, extra-statutory vacation entitlements, provided these are granted.
Consequences for employment law practice
In practice, this means heightened legal sensitivity is required when drafting settlement texts, especially within ongoing employment relationships. Including a general “settled” note concerning all mutual claims cannot have the intended effect with regard to statutory vacation if the employment relationship continues after the settlement.
Employees and companies – impact and necessary action
Protection of employee interests
Employees enjoy extensive protection of their vacation entitlements based on statutory regulations. This includes not only the right to actually take vacation, but also the invalidity of any waiver declarations during the term of the employment relationship—even those based on a court agreement.
Significance for employers
For employers, this means that in labor court settlements, no legally effective waiver of the minimum vacation entitlement can be agreed upon as long as the employment relationship is not terminated by rescission or dismissal. Contract designs and settlement agreements must be carefully reviewed in light of this differentiated legal position to avoid later disputes regarding residual vacation entitlements.
Depiction of any pending proceedings
It should be noted that this decision was made in a specific individual case. Should comparable cases be subject to decision in other proceedings, it remains to be seen whether and to what extent the case law will be confirmed or further developed.
Conclusion and outlook
The current judgment of the BAG provides legal certainty and clearly limits the scope for waiving statutory vacation entitlements in ongoing employment relationships within the context of a settlement agreement. Differentiation and care are required when drafting employment law settlements—especially when distinguishing between statutory and any additional vacation entitlements.
Should this decision give rise to individual legal questions regarding settlement negotiations, vacation entitlements, or contract drafting, the lawyers of the nationally operating commercial law firm MTR Legal, with their many years of experience in employment law, are available to provide advice.
