Germany: Minimum Statutory Leave Cannot Be Waived Even Through Court Settlement

The statutory minimum leave and the entitlement to leave compensation that arises upon termination of the employment relationship cannot be waived, even in the context of a court settlement. Additionally, a factual settlement is invalid if there is no uncertainty about the factual prerequisites for the leave entitlement.

Federal Labor Court Strengthens Employee Rights

The Federal Labor Court (BAG) confirmed in its decision of June 3, 2025 (Case No. 9 AZR 104/24) the judgment of the Cologne Regional Labor Court (LAG) of April 11, 2024 (Case No. 7 Sa 516/23). The decisions were based on the following facts:

An employee was employed as an operations manager from January 2019 to the end of April 2023. From January 2023, he was continuously on sick leave and therefore could not take his vacation that year. In March 2023, he agreed with his employer on the termination of the employment relationship as of April 30, 2023, as part of a court settlement. The settlement provided for severance pay of EUR 10,000. A clause also stated: “Vacation entitlements have been granted in kind.” Although the employee's legal representative had previously pointed out the inadmissibility of waiving the statutory minimum leave, she agreed to the settlement - with reference to the concerns expressed. Shortly thereafter, the employee took legal action to claim compensation for the seven outstanding vacation days from 2023.

Federal Labor Court: No Exclusion of Statutory Claims Possible

The BAG, like the lower courts, made it clear that the entitlement to compensation for the statutory minimum leave has not expired. According to Section 7 para. 4 of the Federal Leave Act (BUrlG), leave not taken must be compensated when the employment relationship ends. A waiver deviating from this is inadmissible according to Section 13 para. 1 sentence 3 BUrlG and therefore void according to Section 134 BGB.

No Factual Settlement - Clear Legal Situation

The court also examined whether the disputed regulation was a so-called factual settlement, to which Section 13 para. 1 sentence 3 BUrlG would not apply. Such a settlement only exists if there are uncertainties about the factual prerequisites for a claim. However, the BAG denied this here. The employee, who had been continuously ill since the beginning of 2023, could not take any leave. In this respect, there was no doubt about the factual prerequisites for the leave entitlement. A factual settlement - which allows an exception to the statutory prohibition of waiver - was therefore not given.

Health Protection Takes Priority - Also Under EU Law

According to the BAG, paid minimum leave under Article 7 para. 2 of Directive 2003/88/EC of the European Parliament and of the Council of 4 November 2003 concerning certain aspects of the organization of working time may not be replaced by financial compensation except upon termination of the employment relationship. During the existing employment relationship, neither compensation nor waiver is permissible.

No Appeal to Good Faith

The employer's objection that the employee had behaved contradictorily was also unsuccessful. Although the employee had agreed to the settlement, he was still entitled to invoke the invalidity of the regulation. No employer may rely on the existence of an obviously illegal regulation.

Conclusion for Practice: Caution with Termination Settlements

Employers may not exclude or circumvent the statutory minimum leave. In general, for the regulation of remaining minimum leave entitlements in a termination or settlement agreement or court settlement, it is recommended that:

• The remaining leave should be specified with concrete dates. A clear differentiation from any subsequent release from work is advisable.
• The compensation claim for the outstanding minimum leave is precisely quantified and the compensation is clearly regulated, if necessary by reducing the severance payment.
• In case of irrevocable release from work, any remaining leave entitlements can be offset.
• In addition to the standard compensation/waiver clause, a formulation for offsetting the compensation claim against the severance payment is recommended: “Any other non-negotiable financial claims as well as claims under collective agreements will be offset against the agreed severance payment according to § [...] of this [termination agreement] accordingly.” This clause is permissible without further ado by virtue of freedom of contract.

However, if neither a release from work is to take place nor leave is to be granted, there is only limited scope for a factual settlement. The specific factual constellation must allow this. This means that there must be uncertainty about the factual prerequisites for a leave entitlement, which is to be resolved through mutual concessions. This is not the case if it is established that the employee could not and cannot take leave due to permanent incapacity for work (see above). In addition, caution is advised regarding a possible combination of offsetting and factual settlement. These are in an alternative relationship - a linking of the two variants would probably be contradictory.