Published on 20 February 2024
The fundamental purpose of statutory leave is to restore workers’ ability to work by means of physical and mental recuperation, which consequently contributes to keeping them in good health. Accumulating several years’ worth of leave runs counter to this recuperative purpose. Pursuant to § 4(1) of the Paid Annual Leave Act (Urlaubsgesetz, UrlG), annual leave should therefore be taken by the end of the leave year in which the entitlement arose, to the extent possible.
In times of variable working hours and flexitime models, the accumulation of long periods of leave not taken has become ever more frequent. This sometimes makes considerable increases in accruals for leave not taken necessary and thus also has a significant impact on balance sheets. The legislator has therefore provided clear limitation rules, so that under the Paid Annual Leave Act (§ 4(5) UrlG), leave becomes time-barred after three years, and after two years in public service (§ 27h(1) of the Contract Staff Act – Vertragsbedienstetengesetz, VBG 1948).
Recently, these statutes of limitation were severely restricted by the European Court of Justice (ECJ) and the Austrian Supreme Court (OGH):
- The ECJ ruled on 22 September 2022 in C-120/21 that such time-barring is inadmissible where the employer has not given advance warning to the worker.
- Congruently, the OGH ruled in its judgment of 27 June 2023 in case 8 ObA 23/23z that limitation rules are not applicable where employers have neither encouraged workers to take their leave nor informed them of the possible loss of that right once the limitation period expires.
These important new developments in case law on paid leave have the following consequences for private and public employers:
- Where employers have neither regularly encouraged workers to take leave nor periodically informed them of the possible statutory limitation, this circumstance precludes the leave entitlement from becoming time-barred.
- Employers are required to warn workers regularly and explicitly of potential time-barring. Explicit encouragement to take leave, lest it fall under the statute of limitations, is also required.
- To prevent the accumulation of periods of annual leave due to potential non-application of limitation rules by virtue of this case law, large organisations should push for timely taking of leave with legal certainty. Otherwise, it is absolutely necessary to set aside reserves for future allowances in lieu of leave not taken.
The burden of proof for compliance with the above-mentioned obligations to provide encouragement and information lies with employers. It is therefore in their interest to establish systems that ensure functionality and legal certainty in complying with the new requirements of case law.
We are available to advise you on the practical implementation of these new obligations to provide encouragement and information.
