Current legal situation:
If the employment relationship is terminated, unused annual leave is to be remunerated by a compensation.
However, the situation is different (Section 10 para 2 Vacation Act – Urlaubsgesetz UrlG) if the employment relationship is terminated by the employee’s premature resignation without a valid reason, as required by law. A valid reason includes, for example, a significant delay of salary payment by the employer or imminent damage to the employee’s health.
If there is no valid reason (such as one of those listed above), then the employee is not entitled to any compensation for annual leave not taken.
An employee – based on section 10 para 2 UrlG – was not paid compensation for annual leave not taken despite having an open vacation claim, because it was a case of premature resignation without valid reason. The case came before the European Court of Justice (ECJ), which ruled that this provision of the UrlG (Vacation Act) is contrary to Union law:
According to Art 7 of the Working Time Directive and Art 31 para 2 of the EU Charter of Fundamental Rights, there is a fundamental right to paid annual leave and, upon termination of employment, to financial compensation for unused leave. According to the jurisdiction of the ECJ, the type of termination is irrelevant to this matter. Thus, Employees are entitled to compensation for annual leave not taken in any case, even in the event of premature termination without valid reason.
This decision must now be observed by the Austrian courts. Here is a link to the full text of the ECJ judgment.
Provided that the premature termination took place no longer than three years ago, employees who have left the company can still assert claims for compensation for annual leave not taken retroactively. However, any shorter expiry periods that have been agreed upon must be considered.
In a recent decision by the OGH, the Austrian Supreme Court, the ECJ ruling was adressed:
Since the fundamental right to annual leave according to EU law is limited to four weeks, the right to receive compensation for anual leave not taken also only extends to these four weeks. Austrian labor law, however, goes beyond that and provides for 5 (or 6) weeks of vacation. Thus, it is legitimate for the Austrian legislator to determine the granting, or omission, of the compensation for anual leave not taken for these 1 (or 2) additional weeks.
The Supreme Court has therefore ruled that in the case of premature resignation without a valid reason, the compensation for leave not taken is only calculated on the basis of the four-week minimum vacation. This means that generally it will be a lower amount.
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