The Higher Labour Court Cologne (Landesarbeitsgericht, LAG) ruled on 14 September 2016 (docket number 8 Sa 324/16) that holiday entitlements do not extinguish if the employment relationship ends by reason of the worker’s death. The heirs can claim all outstanding leave benefits not depending on whether the claim for allowance in lieu existed at the time of the employee’s death. The holiday entitlement converts into an entitlement of allowance in lieu in favour of the heirs. The previous case-law of the Federal Labour Court (Bundesarbeitsgericht, BAG) denied the hereditability of the holiday entitlement (docket number 9 AZR 532/11).

The decision follows the previous rulings of the ECJ (European Court of Justice) (June 12, 2014 – docket number C-118/13) and the Higher Labour Court Düsseldorf (December 15, 2015 – 3 Sa 21/15) concerning the heirs’ right to the allowance in lieu of outstanding leave and applies the interpretation of article 7 paragraph 2 of the European Directive 2003/88/EC to holiday entitlement. Section 7 paragraph 4 of the Federal Leave Act (BUrlG) has to be interpreted in conformity with the directive.

The scope of the claim includes statutory minimum holidays, additional statutory leave for severe disability and additional leave which is regulated by collective agreements. Collective bargaining parties can agree on different provisions for the payment of additional leave, e.g. that the additional leave is not compensated in the case of termination of employment or the employee’s incapacity to work. However, the parties must use clear wording to achieve the outcome that the employer is not liable for claims for payment in lieu of the additional leave.

The decision of the Higher Labour Court is a consequence of the binding interpretation of the European Directive 2003/88/EC by the ECJ. Employers should take into consideration that the employee’s death in a current employment relationship entitles heirs to claim payment in lieu. The effects of this case law will be noticeable, especially in cases of long-term sick employees, who cannot use their holiday entitlement during absence.