Employees' Statutory Minimum Vacation Rights Unwaivable in Court Settlements: Federal Labor Court Decision
Waiving statutory leave entitlements is no longer accepted.
In a groundbreaking decision, the Federal Labor Court (Federal Arbitration Court, BAG) in Erfurt ruled that employees cannot forfeit their statutory minimum vacation, even when terminating their employment contract through a court settlement. This decision, set in North Rhine-Westphalia, challenges the commonly held belief that statutory minimum vacation can be waived in settlement agreements.
The case centered around an operations manager who, due to illness, could not work throughout their employment. After a court settlement, the employment relationship was terminated with a severance payment of €10,000. The settlement document stated that vacation claims were "granted in kind." However, the plaintiff contested this claim and demanded payment for the remaining seven days of their statutory minimum vacation, worth €1,615 plus interest.
Lower courts, including the Cologne Higher Labor Court, ruled in favor of the plaintiff. But the Federal Labor Court has now dismissed the employer's appeal. According to the court, the employee is entitled to compensation for their unfulfilled statutory minimum vacation from 2023. The court stated that agreements that vacation claims are granted in kind are invalid when it comes to waiving minimum vacation.
The ruling is significant as it underlines that the favour rule (Günstigkeitsprinzip) applies to settlements, protecting workers' rights and ensuring they receive the most advantageous terms. This principle, a cornerstone of German labour laws, prevents inconsistencies in the treatment of workers and demands a comprehensive comparison of all employment conditions [5].
The case serves as a reminder that statutory rights cannot be waived when not explicitly allowed by law. Waivers, if permitted, must be in writing and agreed upon by the employee explicitly. The BAG has established that waivers of statutory rights, like minimum vacation, must be a part of a settlement agreement and adhere to principles of fairness and transparency. However, specific rulings by the Federal Labor Court on this topic could further clarify these principles.
To gain a comprehensive understanding of this decision and its implications, consulting specific BAG decisions or seeking legal advice from a German labour law expert is advisable.
In light of the Federal Labor Court's decision, the right to statutory minimum vacation is non-waivable, even in court settlements, demonstrating the importance of upholding employees' statutory rights. This ruling emphasizes the application of the favor rule, ensuring fairness and transparency in settlement agreements, and aligns with the principle that statutory rights, such as those related to family life, science, and health-and-wellness in the workplace, cannot be waived without explicit legal permission.
