Germany: The heirs of a deceased employee are entitled to financial compensation for untaken holidays
The plaintiffs, two widows as heirs of their deceased husbands, claimed financial compensation towards their husbands’ former employers for the annual leave their husbands could not take before their death.
The German Federal Labor Court referred the matter to the European Court of Justice (ECJ). The ECJ was asked to interpret the EU laws on the annual leave entitlement, according to which every employee receives a minimum paid annual leave of four weeks, which may not be financially compensated except in the event of termination of employment. In 2014 the ECJ had already ruled that an employee’s entitlement to this minimum paid annual leave does not cease with his death. It was questionable whether this also applies in the present case, as the annual leave entitlement is not part of a person’s inheritance under German law. According to the German courts, the purpose pursued by granting annual leave, which is to enable the employee to recover, could no longer be achieved after the employee’s death.
The ECJ has now confirmed that an employee’s entitlement to paid annual leave does not cease with his death. Furthermore, the heirs are entitled to claim financial compensation for the annual leave not taken from the former employer of the deceased employee. Where national law precludes this, heirs may rely directly on EU law.
The ECJ argued that while the purpose of the annual leave, relaxation and recovery, can no longer be achieved after the employee’s death, the right to paid annual leave is an essential principle of the EU’s social law and is expressly guaranteed as a fundamental right. This right particularly includes the entitlement to payment during annual leave and financial compensation at the end of employment for annual leave not taken.
According to the ECJ, this financial component of the claim to paid annual leave is intended to be transferred to the employee’s assets and cannot be withdrawn subsequently. Consequently, the right to paid annual leave shall be transferred to the employee’s heirs in form of a right to financial compensation for leave not taken by the deceased employee.
The German Federal Labor Court is, therefore, obliged to leave German inheritance law unapplied and ensure that the heirs receive financial compensation from the former employer for the annual leave not taken by the deceased employee.