No Waiver of Statutory Minimum Leave Through Court Settlement

On June 3, 2025, the Federal Labor Court (Bundesarbeitsgericht) ("BAG") ruled that employees are entitled to financial compensation for outstanding statutory minimum vacation days. Even if a court settlement includes an agreement to waive remaining vacation days, this does not change the entitlement (9 AZR 104/24).

The Case

An employee worked as an operations manager from January 1, 2019, to April 30, 2023. At the beginning of 2023, the employee fell sick and remained so until the end of his employment in April 2023, preventing him from taking his statutory minimum leave of seven days for 2023.

In March 2023, the parties agreed to terminate the employment through a court settlement, which included a severance payment of EUR 10,000. Section 7 of the settlement stated: "Vacation entitlements are granted in kind."

Before the settlement was finalized, the employee's legal counsel pointed out that the statutory minimum leave entitlement cannot be effectively waived. Nevertheless, the employee agreed to the settlement.

After the employment ended, the employee sued for financial compensation for seven days of outstanding statutory minimum leave for 2023 in the amount of EUR 1,615.11 plus interest. The BAG ruled in favor of the employee, rejecting the employer's appeal.

Why Waiving Minimum Leave is Invalid

The BAG emphasized that, according to Section 7 para. 4 of the German Federal Leave Act (Bundesurlaubsgesetz - BUrlG), employees are entitled to compensation for unfulfilled statutory minimum leave. This provision cannot be deviated from to the employee’s detriment. Therefore, Section 7 of the court settlement, which provides for the lapse of the statutory minimum leave, is invalid.

The court clarified that neither the legal right to paid vacation nor a future entitlement to compensation for statutory minimum leave may be excluded or restricted in advance. This also applies to court settlements that provides for the termination of the employment relationship in exchange for a severance payment, even if it is already clear that the employee will be unable to take the statutory minimum leave due to illness. Paid time off is intended to protect the employees’ health. It cannot be waived by contract during an employment relationship.

This aligns with European law, which prohibits financial compensation for statutory minimum leave during an ongoing employment relationship. Therefore, an employee cannot "waive" statutory minimum leave in an existing employment relationship, especially without financial compensation.

No Agreement on Facts Due to Existing Uncertainties

Furthermore, Section 7 of the court settlement does not allow for an agreement on facts under which Section 13 para. 1 sentence 3 of the BUrlG would not apply. Such an agreement requires uncertainty about specific facts (e.g. number of vacation days taken). In this case, however, ther was no uncertainty. Due to the employee's continuous incapacity to work since the beginning of 2023, there was no reason to doubt the existence of the conditions for the leave and compensation entitlement.

No Unlawful Exercise of Rights

The employer's objection that the employee could not invoke the invalidity of the exclusion of leave entitlements because he was not acting in good faith was unsuccessful. According to the court, the employee acted inconsistently by agreeing to Section 7 of the settlement and suing for compensation for the remaining leave. However, the employer was not entitled to protection because the employer could not rely on an obviously unlawful provision.

Significance for Employers

With its ruling, the BAG has once again strengthened employees' rights regarding leave entitlements in the event of loss of vacation days due to sickness. Recreational leave is essential for employees’ health. Therefore, financial compensation for the statutory minimum leave cannot be waived during an ongoing employment relationship – not even by the employees themselves.