15. March 2021 – The Entitlement to Holiday Is Reduced During Short-Time Work.

A year has passed since Germany first felt the effects of the Corona pandemic. Preventive measures to protect against infection and loss of business led to the introduction of short-time work on an unprecedented scale. Short-time allowances were paid to 6 million workers as early as April 2020.[1] After almost a year of short-time work, many employers are now asking themselves how much holiday their employees are entitled to and whether workers who have had short-time work zero for a whole year get their full annual leave.

Last Friday, for the first time, a regional labour court published its decision on this question. The Düsseldorf Regional Labour Court (Landesarbeitsgericht Düsseldorf – LAG Düsseldorf) ruled that the entitlement to holiday for periods of short-time work must be reduced proportionately (see the decision of the Düsseldorf Regional Labour Court from 12 March 2021 – 1 Ca 2155/20)

This article explains the legal background of the decision and shows how to calculate the entitlement for annual leave whilst taking short-time work into account.

A. Legal Uncertainty Surrounding the Reduction of Entitlement to Holiday

To this day the Federal Labour Court (Bundesarbeitsgericht – BAG) has not yet decided whether the entitlement to annual leave is reduced during short-time work and whether such a reduction must be expressly declared. Only a minority of representatives in specialist literature and the German Federation of Trade Unions (Deutscher Gewerkschaftsbund – DGB) argue, that the employee’s holiday entitlement should not be reduced because short-time work on the basis of the economic situation is in the employer’s interest. Employees on the other hand, have no free time during short-time work are unable to plan for time off because of the need to fulfil certain reporting obligations whilst also living in the expectation that the employer might end short-time work at any time.

On the contrary, the prevailing opinion in the literature states that the entitlement to holiday can be reduced during short-time work. Employees in short-time work are to be treated in the same way as part-time employees regarding their entitlement to holiday and thus their entitlement to leave should be calculated based on the actual number of days worked. The Düsseldorf Regional Labour Court and – at first instance – the Essen Labour Court share this view.

The Regional Labour Court Düsseldorf has expressly allowed an appeal to the Federal Labour Court, so it remains to be seen whether one of the parties will appeal and how the Federal Labour Court will then decide. Until then, the decision of the Düsseldorf Regional Labour Court provides welcome guidance for employers.

B. Legal Background

In the context of short time work it must be differentiated between two levels: the first level regards social security between the employer and the Federal Employment Agency (Bundesagentur für Arbeit) and the employee and the Federal Employment Agency. This level is concerned with the provision of short-time allowance and the employee’s reporting obligations.

The arrangement of short-time work at a contractual level must be fundamentally separated from the first level. According to the definition of the Federal Labour Court, short-time work is the temporary reduction in working hours with the return to the originally agreed working hours subsequentially (cf. judgement of the Federal Labour Court from 18 November 2015 – 5 AZR 491/14). This reduction in working hours occurs through the introduction of short-time work, e.g. through a works agreement or through an individual agreement with the employee.

According to the ruling of the Federal Labour Court, in principle, there is no entitlement to paid leave for periods of agreed unpaid leave (see judgment of the Federal Labour Court, from 19 March 2019 – 9 AZR 406/17). In this regard, the Federal Labour Court states that, a reduction in the holiday entitlement follows the rationale of the Federal Holiday Act (Bundesurlaubsgesetz -BUrlG.) As follows, the number of days of leave granted is linked to the number of days on which there is a duty to work and the determining factor for the number of days of leave granted is the number of days on which there is a duty to work. In another case, the Federal Labour Court ruled, that in the context of a block model for partial retirement, no claims to paid leave arise within the exemption period (see judgment of the Federal Labour Court from 3 December 2019 – 9 AZR 33/19). n a decision on partial retirement, the ECJ (Europäischer Gerichtshof – EuGH) had already found that this assessment is in line with EU law (see ECJ, 13.12.2018 – C-385/17). The ECJ also states, that the prerequisite for the accrual of an entitlement to annual leave is a duty to work.

If these principles are applied to short-time work, it follows that the introduction of short-time work is to be treated in the same way as any change in working time, just as for example from full-time to part-time work.

C. A Reduction in Short-Time Work

Should work still be carried out by employees during short-time work, e.g. because the duty to work is only reduced by 50%, the holiday entitlement is calculated according to the Federal Labour Courts’ formula for calculating holiday in the event of a change in working hours (more precisely, working days) during the year (cf. judgement of the Federal Labour Court from 10 February 2015 – 9 AZR 53/14 (F)).

This means that the entitlement to annual leave is accrued for the duration of short-time work in accordance with the fixed number of working days. If the employee worked five days per week before the start of short-time work and continues to work five days per week for half of the day, the number of days of leave does not change. However, if the employee now works four days per week instead of five due to short-time work, 1/12 of the reduced entitlement to annual leave is accrued for each full month of short-time work. The remaining months are each counted as 1/12 of the full-time annual entitlement.

Example:

The employee has 30 days of leave with 5 working days per week. Until the 30th June, the employee works 5 days per week. From the 1st July he works 4 working days per week for the rest of the year. For the first six months of the year, he accrues 1/12 of his full annual entitlement to leave per month. For the last six months, his entitlement is 1/12 of the reduced entitlement to annual leave for each month:

30 days of leave x 6/12 = 15 days of leave

30 days of leave x 6/12 x 4/5 = 12 days of leave

In total therefore, he is entitled to 27 days of leave for the whole year.

D. Short-Time Work Zero

According to the decision of the Regional Labour Court Düsseldorf, this formula also applies when short-time work zero is introduced, i.e. when the employee does not work at all during short-time work zero.

In the above example, the holiday entitlement for the second half of the year would be 0 days of holiday and the employee would be entitled to 15 days of holiday in total.

E. Short-Time Work Zero with Intermittent Work-Assignments

Generally, if short-time work zero has been introduced, but the employee is called back for isolated work assignments, this is treated as a so-called fluctuating working hours at a contractual level. For these cases, the Federal Labour Court has established the following formula for calculating working hours in 2019 (Cf. judgement of the Federal Labour Court, 19.3.2019 – 9 AZR 406/17):

24 working days holiday x no. of days with a duty to work : 312 working days

This formula is based on the minimum entitlement to holiday of 24 working days in a week with 6 working days (Monday to Saturday) pursuant to the Federal Holiday Act. It is to be applied accordingly to short-time work with fluctuating working hours. The number of days with a duty to work must be documented and tracked individually for each employee.

For example, if an employee is entitled to 30 days of leave (based on a five-day week) and has worked a total of 40 days during an entire year in short-time work zero, the leave entitlement is to be calculated as follows:

36 working days holiday x 40 days with a duty to work : 312 working days

resulting in an entitlement of 4.6 days annual leave.

F. Practice Tip

Even though, dogmatically speaking, the reduction in the entitlement to holiday occurs automatically, employees should also be informed in writing, for example as in the case of a reduction in the entitlement to holiday during parental leave.

This also has the advantage that employees know from the outset how their entitlement to take leave will be dealt with and do not feel taken by surprise at the end of the year.

If employees work intermittently during short-time work, these work assignments should be documented precisely for the purpose of applying for short-time work allowance and for calculating leave. Since the entitlement to holiday is calculated purely on the basis of the number of days worked, every day worked – even if it is only a few hours – should be counted.

[1] [1] Institut für Arbeitsmarkt- und Berufsforschung (IAB): Durchschnittliche Arbeitszeit und ihre Komponenten in Deutschland; Bundesagentur für Arbeit: Realisierte Kurzarbeit (hochgerechnet, Monatszahlen).

Author: Dr. Martina Berenbrinker