Application of Time Limits to Payments in Lieu of Leave


[] A time limit contained in an employment contract or an applicable collective bargaining agreement also extends to an entitlement to payment in lieu of leave pursuant to section 7(4) of the Federal Leave Entitlement Act (Federal Labour Court – 9 AZR 352/10).


The Federal Labour Court was required to decide on 9 August 2011 whether a time limit contained in a collective bargaining agreement applied to an employee's claim for payment in lieu of leave, which she had accumulated over several years due to long-term illness making her incapable of working. The plaintiff was employed as a part-time nurse by the defendant from October 1975 to 31 March 2008. She has remained incapable of working due to illness since 19 October 2006 and has been receiving an unlimited disability pension since her employment contract terminated. By letter of 25 February 2009, she claimed payment from the defendant of the amount of € 1,613.62 in respect of outstanding leave entitlements from 2007 and 2008. Pursuant to section 37(1) of the Collective Agreement for the Public Service of the States (Tarifvertrag für den öffentlichen Dienst der Länder - TV-L) of 12 October 2006, rights under an employment contract will extinguish inter alia if the employee does not assert them in writing within six months from the date they accrue.


The plaintiff's appeal to the Federal Labour Court, which was restricted to the question of payment in lieu of her minimum statutory annual leave entitlement, was unsuccessful. Pursuant to section 7(4) of the Federal Leave Entitlement Act, payment in lieu of leave must be made where the employee is unable to take leave because the employment contract has terminated. In the opinion of the Federal Labour Court, the plaintiff's entitlement to payment in lieu of leave extinguished in the present case since she failed to take the leave within the time limit in section 37(1). Pursuant to section 7(4) of the Federal Leave Entitlement Act, if incapacity for work continues beyond the termination of employment, a claim for payment in lieu of existing leave will arise at the time employment terminates and be immediately due. It is not a substitute for a leave entitlement, but is instead purely a money claim. Thus, like other rights under an employment contract, it is subject to the limitation periods contained in the employment contract or a collective agreement. The Federal Labour Court also stated that this applied to payment in lieu of the inalienable minimum statutory annual leave entitlement pursuant to section 13(1) sentence 1 in conjunction with section 3(1) of the Federal Leave Entitlement Act.


The Federal Labour Court had refused to apply time limits to claims for payments in lieu of leave in its previous case law. It explained its refusal on the basis that the law imposes a time limit on annual leave entitlements and that payments in lieu of leave were a substitute for such entitlements. In the present decision, the Federal Labour Court diverges from its case law and takes into account the European Court of Justice's decision of 20 January 2009 in the "Schultz-Hoff" case, where it was held that the Federal Labour Court's previous case law violated European law because it allowed annual leave entitlements to extinguish by the expiry of the carry-over period in the case of continued incapacity for work. Since this special "time frame" for annual leave and payment in lieu of leave no longer applies, the justification for applying different time limits to a money claim in respect of leave than to other statutory payment claims has been removed and, as a result, these limits also apply to payments in lieu of leave (Düsseldorf Higher Labour Court, judgment of 23 April 2010 - 10 Sa 203/10).

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