Unused leave at year-end: Can your employer cancel the days?

Three questions before cancelling leave

Section 7(3) of the German Federal Leave Act generally requires leave to be taken in the current calendar year. Carry-over may be justified by urgent operational or personal reasons; the statutory period is then generally the first three months of the following year. These deadlines must be read together with the employer’s responsibilities.

The BAG requires the employer to enable leave to be taken in practice. This includes a specific request and clear, timely information about the risk of losing it. Employees’ own knowledge of statutory deadlines does not replace the employer’s cooperation (9 AZR 266/20, paragraphs 22 to 24 and 47). Check:

• Was my outstanding leave entitlement specifically identified?
• Was I asked to take leave and informed of the consequences in good time?
• Was I actually able to take the leave?

Lapse and limitation are different questions

When leave lapses, the entitlement ceases to exist. Limitation generally means that the employer may refuse performance after raising the limitation defence. The BAG expressly distinguishes the two (paragraph 45). Under section 195 of the German Civil Code, the ordinary limitation period is three years.

For statutory leave, however, the BAG holds that this period begins only at the end of the year in which the employer has fulfilled its responsibilities. Old leave therefore does not automatically become worthless after three years. This also does not mean leave always survives indefinitely: proper notices and a genuine opportunity to take leave can trigger the relevant time limits (paragraphs 31 and 38 to 51).

What the BAG actually decided

In the case decided, the employer had neither asked the employee to take leave nor warned her that it could lapse. His appeal on points of law failed. The award of EUR 17,376.64 gross for 76 days of leave stood. This was an individual entitlement arising from that employment relationship, not a standard payout available to other employees (operative part and paragraphs 4, 8 to 9 and 52).

The judgment also addresses additional contractual leave. Different rules may apply to days exceeding the statutory minimum. Without clear indications of a different arrangement, the statutory principles may also apply to additional leave. The employment contract and any applicable collective agreement therefore need to be reviewed (paragraphs 25 to 27 and 50).

An example for reviewing leave in November

Our own hypothetical example: the leave portal shows eight outstanding days of statutory leave. A general message merely says “Please plan your remaining leave”. In December, the days are removed by reference to year-end. Our assessment: these facts do not establish that the entitlement has lapsed. It is necessary to clarify whether further specific notices were given, when they were received and whether eight days could still actually be taken.

Still request your preferred leave dates in good time and retain your requests and the responses. Where prolonged incapacity for work or other interruptions are involved, the outcome cannot be determined solely from the absence of a notice. These situations require an assessment of the actual course of events.

After employment ends, the claim is for payment

Where leave can no longer be taken because employment has ended, section 7(4) of the Federal Leave Act provides for payment in lieu. A key distinction applies to this monetary claim: under BAG judgment of 31 January 2023, 9 AZR 456/20, the ordinary limitation period generally begins at the end of the year in which employment legally ends. This applies regardless of whether proper leave notices were previously given (headnote 2 and paragraphs 17 to 19 and 37 to 43).

After leaving a job, do not assume that a missing leave notice keeps every claim open. Have the claim, the start of the limitation period and any further time limits under an employment or collective agreement checked promptly. The 2023 judgment includes a special assessment of older claims from before the 2018 change in case law; this does not generally extend time limits for current cases.

Documents to retain

Our practical recommendation: request a clear breakdown by leave year and the basis for any alleged cancellation. The following documents help with the review:

• Employment contract, amendments and applicable collective agreement provisions.
• Leave account, requests, approvals and refusals.
• Employer notices, including their dates and evidence of receipt.
• If employment has ended: the termination date, final payroll statement and previous payment requests.