Problem
If an employment relationship is terminated by mutual agreement through a court settlement, the question arises as to what extent any remaining statutory minimum leave must still be compensated. The Federal Labor Court (BAG) recently ruled that even in the case of a court settlement, the statutory minimum leave cannot be effectively waived.
The facts
In the case decided by the BAG (Ref. 9 AZR 104/24), an operations manager was employed from the beginning of January 2019 until the end of April 2023. During this period, the employee was continuously unable to work due to illness. He was therefore unable to take his (statutory) leave for 2023 by the end of the employment relationship. While the employment relationship was still in place, the parties agreed in a court settlement (in March 2023) that the employment relationship would end on April 30, 2023, in return for payment of severance pay in the amount of $10,000. The settlement also contained a clause stating that the employee would waive his statutory minimum leave entitlement in return for payment of severance pay in the amount of $10,000.would end on April 30, 2023, in return for a severance payment of €10,000. The settlement also included the clause "Vacation entitlements shall be granted in kind."
Following these court proceedings, the employee sued the employer in new labor court proceedings for compensation for seven statutory vacation days.
Legal background
The Federal Labor Court granted the employee a claim to vacation compensation. In the court's view, the clause in the court settlement ("Vacation entitlements are granted in kind") was invalid.
Section 7 (4) of the Federal Leave Act (BUrlG) allows employees to receive payment for unused vacation days after termination of employment. The clause included in the settlement was intended to express that the employee had already received his vacation in full by actually taking time off, which would eliminate any claim to compensation. However, as the employee was continuously unable to work due to illness during the employment relationship, he was in fact unable to take the statutory minimum leave.
In the opinion of the Federal Labor Court, the provision contained in the court settlement is invalid because it deviates from the statutory provisions to the detriment of the employee (see § 134 BGB in conjunction with § 13 (1) sentence 3 BUrlG). It is therefore not possible for the employee to waive the statutory minimum leave entitlement.
Conclusion and recommended action
The ruling strengthens the position of the employee. Even if the employee agrees to a settlement with a corresponding waiver clause, they retain their (statutory) vacation compensation claims and can successfully assert these in new court proceedings. Employers are therefore advised to carefully check existing vacation entitlements before concluding a court settlement and to take them into account appropriately when drafting the court settlement.
The statements represent initial information that was current for the law applicable in Germany at the time of initial publication. The legal situation may have changed since then. Furthermore, the information provided cannot replace individual advice on a specific matter. Please contact us for this purpose.