Prerequisites for the limitation period
Pursuant to Section 4 para 5 UrlG (Urlaubsgesetz – Annual Leave Act), paid annual leave entitlement becomes time-barred two years after the end of the year in which it arose. When annual leave is consumed, the old annual leave is always consumed first before the new annual leave.
This is the Austrian legal situation – clear enough.
Now, however, a (highly controversial) decision of the ECJ must also be taken into account in Austria when it comes to the limitation period of annual leave:
The ECJ has clarified that regarding the annual leave entitlements, employers have an obligation to provide information and encouragement. They must notify their employees in a timely manner of the impending expiry of annual leave as well as request and enable them to consume the open leave. If the employer fails to do so, the vacation does not become time barred. Thus, the annual leave entitlement would continue to exist for an unlimited period.
Employers need to take action
Our recommendation is to inform employees (at least once a year) about their current annual leave entitlement. This information letter should also contain a reminder about annual leave that might be soon to expire and request the employee to use it up.
We would be happy to assist you with the preparation of such information!