Pursuant to Sec. 7 para. 4 of the German Federal Leave Act (Bundesurlaubsgesetz) payment in lieu of accrued but untaken holiday is only possible if it cannot be taken due to the termination of the employment. On termination of the employment, the holiday entitlement automatically transforms into an entitlement to compensation.
In the event of an employee‘s death, regarding the question whether or not the employee’s heirs are entitled to claim compensation for any accrued holiday not taken by the employee, the German Federal Labour Court has held that it depends on the time of death:
- If the time of death occurred after the termination of the employment, the entitlement to compensation was deemed to have already arisen and therefore passed into the estate;
- If the time of death occurred during the employment, then the employee’s heirs were not entitled to compensation for unused holidays.
However, in 2014, the European Court of Justice (ECJ) by contrast also granted compensation in cases where the employment ended due to the employee’s death. As a result in October 2016 the German Federal Labour Court referred to the ECJ the question whether or not compensation in the case of an employee’s death during employment also passed to the employee’s heirs, if this was excluded by national inheritance law.
In his opinion of 29 May 2018 the ECJ’s Advocate General was of the view that employers are in any case obliged to grant heirs compensation for unused holidays. According to the Advocate General, employees of a public employer could directly invoke the EU directive; employees of a private employer could argue an entitlement based on Sec. 31 para. 2 of the European Charter of Fundamental Rights. Although the ECJ’s judgment is currently still pending, it is likely that in the future heirs will also be able to claim compensation for unused holidays in cases where an employment ends due to the employee’s death.