Waiver of vacation?
Can vacation be waived in a settlement?
In its judgment of 3 June 2025 (Case No. 9 AZR 104/24), the Federal Labour Court (Bundesarbeitsgericht – BAG) held that, within an existing employment relationship, a waiver of statutory minimum leave by way of a court settlement is not permissible – at least not where the employee was continuously incapacitated for work during the entire relevant period. Why, then, is the timing of the settlement decisive, and what significance does it have for the validity of the waiver of leave? You will find the answers in the following article.
*where only the masculine form is mentioned in this article, the feminine / diverse form is also included
Federal Labour Court, verdict of 3rd June 2025 -9 AZR 104/24 (PM)
Summary of the press release from the Federal Labor Court
The parties are in dispute over the compensation for seven days of statutory minimum leave from the year 2023.
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The defendant was continuously incapacitated for work from the beginning of 2023 until the termination of his employment on 30 April 2023 and was therefore actually unable to take his leave for that year. In the course of legal proceedings, the parties reached a settlement under which their employment relationship would end in return for a severance payment of €10,000. Clause 7 of the settlement states: “Leave entitlements have been granted in kind.” With his (new) claim, the defendant sought compensation for seven outstanding days of statutory minimum leave from 2023. He argued that the waiver of statutory minimum leave in Clause 7 of the settlement was invalid.
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The lower courts upheld the claim. The Ninth Senate of the Federal Labour Court also dismissed the claimant's appeal.
The defendant is entitled to compensation for the statutory minimum leave not taken in 2023 in accordance with § 7(4) of the Federal Vacation Act (Bundesurlaubsgesetz – BUrlG). The leave entitlement was not extinguished by Clause 7 of the court settlement dated 31 March 2023. Clause 7 does not constitute a settlement on the facts within the meaning of § 13(1) sentence 3 BUrlG. Such a factual settlement requires that existing uncertainty about the actual prerequisites of a claim be resolved through mutual concessions. However, due to the defendant’s uninterrupted incapacity for work since the beginning of 2023, there was no uncertainty regarding the factual prerequisites for the leave entitlement.
The claimant's argument that the defendant was precluded from invoking the invalidity of the exclusion on grounds of good faith was unsuccessful. The claimant could not rely on the validity of an obviously unlawful provision.
Conclusion & practical tip
The decision of the Federal Labour Court once again highlights the high requirements for a valid waiver of statutory minimum leave.
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Such a waiver is ineffective if it is agreed upon during an ongoing employment relationship and the employee was continuously incapacitated for work throughout the entire relevant period. A waiver structured as a so-called factual settlement has no legal effect in this case, as the leave could neither be granted nor taken due to illness. The situation is different if the settlement is concluded only after the termination of the employment relationship: in this case, a valid waiver of the claim for compensation for unused leave can occur, as this is a purely monetary claim that can be waived without restriction. The decisive factor is therefore the timing of the settlement’s conclusion.
You might also be interested in these blog article on the topic of annual leave: Foreign Medical Certificates of Incapacity
Author of this article: Janina Aue, Lawyer & Mediator
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