Granting of vacation in the event of extraordinary termination without notice, alternatively ordinary termination timely termination

Every employer's lawyer is familiar with the dilemma when the employer wishes to terminate an employment relationship without notice for cause, but in the alternative wishes to issue an ordinary notice of termination and asks how the employee's outstanding vacation entitlements can be dealt with in this case.

In practice, labor courts often take the view that if an employment relationship is terminated for cause and without notice, the outstanding vacation entitlement must simply be compensated, which in the event of an amicable agreement on the validity of the alternative ordinary termination often means that the vacation compensation must be paid in addition to the default of acceptance pay for the duration of the ordinary notice period. In its ruling of August 25, 2020 (9 AZR 612/19), the Federal Labor Court has now shown a feasible way to avoid this unfortunate result. The Federal Labor Court has namely decided that the employer can also grant leave as a precaution in the event that an employment relationship is not terminated by extraordinary termination without notice, but only by ordinary termination with notice. In this case, in the event that the extraordinary termination without notice is invalid, the outstanding vacation entitlement for the period following the receipt of the extraordinary termination without notice may be granted as an alternative if the remuneration for the vacation period is either paid before the start of the vacation or its payment is unconditionally promised.

In this case, the following clause could be included in the respective termination letter:

"In the event that the termination without notice is effective, we will compensate the vacation not yet taken by the time of termination. If the termination without notice proves to be invalid, we have terminated your employment relationship in the alternative on an ordinary basis. In this case:

You will take all your vacation not yet taken immediately following receipt of this notice of termination in the period from ... to .... In this case, the vacation compensation paid by us is to be understood as payment of the vacation pay for the period in question. In any case, however, we unconditionally promise you vacation pay for the period of your vacation."

In this case, such a provision can avoid the need for additional vacation time to be paid in addition to the remuneration during the notice period.

The BAG has only provided a way out for the employee concerned if the employee objects to the determination of the vacation taken by the employer and thus objects to the precautionary determination of the vacation or expresses a different desire for vacation.