On July 15, 2025, the German Federal Labor Court (Bundesarbeitsgericht – BAG) further refined its case law on the lapse of annual leave where an employee is long term incapacitated for work due to illness. The court ruled in Case No. 9 AZR 198/24 that forfeiture may be precluded by more favorable contractual arrangements.

• The German Federal Labor Court recently ruled that annual leave does not lapse during long-term illness if more favorable contractual arrangements are in place.
• Statutory minimum annual leave generally expires fifteen months after the end of the leave year in cases of uninterrupted incapacity for work, unless a more favorable provision applies.
• Employers may want to review employment contracts to ensure clarity on annual leave provisions and align them with collective agreements to avoid inconsistencies.

The statutory minimum annual leave under the Federal Vacation Act (Bundesurlaubsgesetz – BUrlG) serves the purpose of rest and recuperation. Interpreting section 7(3) BUrlG in conformity with EU law, the BAG has held that, in cases of uninterrupted incapacity for work, statutory minimum leave generally expires fifteen months after the end of the leave year in which the employee first became continuously incapacitated. Specifically, leave that cannot be taken due to uninterrupted incapacity for work lapses fifteen months after the end of the leave year in which the incapacity arose. This fifteen‑month limit is intended to prevent the unlimited...

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