Can the employer order company leave?

Employers who conclude that the uncertainties described in part 2 of our series are too great when unilaterally ordering employees to take leave may choose a different approach by ordering ‘company leave’ under the conditions set out below. Company leave means the complete closure of an undertaking for a certain period of time, with the employer ordering employees to take leave during this time (see Federal Labour Court, decision of 28 July 1981 - 1 ABR 79/79).

1. Participation of the works council

Introducing company leave requires the proper participation of the works council, provided that a works council exists. Introducing company leave is subject to co-determination in accordance with section 87(1) no. 5 of the German Works Constitution Act (‘BetrVG’), which means that the works council must agree to such company leave. That in extreme situations the employer can act provisionally without the agreement of the work council is purely theoretical. Obviously, given that the pandemic has already lasted several months, the conditions for the employer acting in this way are not satisfied (see Federal Labour Court, decision of 19 January 2010 - 1 ABR 55/08)

If the works council has not given its consent, introducing company leave will be invalid under collective law as far as the employees are concerned. The employee may (without undue delay) object to the leave being ordered during company leave. If the employee fails to object without undue delay, some courts (Nuremberg Regional Labour Court, judgment of 21 February 2014, - 6 Sa 588/13) have ruled that leave will not be deemed validly granted. Although there are strong arguments suggesting that the principles outlined in part 2 of our series regarding the validity of leave unilaterally ordered by the employer apply here as well, in cases of doubt it should always be attempted to obtain the works council’s prior consent. While an informal agreement is sufficient under collective law, it does not – unlike a works agreement – directly affect the employees’ employment relationships. A works agreement should thus be preferred. Regardless of which type of agreement with the works council is chosen, the following further requirements apply to such agreement in any event:

2. Requirements in terms of content

2.1 Scope of company leave

When company leave is introduced, it must first be ensured that the employee still has sufficient days of leave available. According to the Federal Labour Court, it is sufficient if employees have two-fifths of their leave entitlement at their free disposal after the company leave (Federal Labour Court, 28 July 1981 - 1 ABR 79/79).

2.2 Notice period to be observed

In order to effectively order company leave, a reasonable notice period must be observed so that the employee’s interests in taking leave are sufficiently taken into consideration. The length of the notice period depends on the circumstances of the individual case. In principle, we recommend (at least) two weeks’ notice, although in particularly urgent cases this may even be less.

2.3 Employees‘ leave wishes need not be taken into consideration

Although the employee’s leave wishes must generally be taken into account by the employer when planning leave (section 7(1) sentence 1 of the Federal Leave Act, ‘BUrlG’), according to the convincing case law of the Federal Labour Court (decision of 28 July 1981 - 1 ABR 79/79), such wishes do not prevent the employer from introducing company leave. This is because effectively introduced company leave as such constitutes a ‘company interest’ which, according to section 7(1) of the Federal Leave Act, entitles the employer to deviate from the leave wishes of individual employees. After all, involving the works council ensures that the (overall) interests of the employees have been taken into account and that a balance has been struck with the employer's business interests.

3. Company leave in undertakings without a works council

What to do if there is no works council? According to the applicable case law, the employer can, except in rare cases of hardship, introduce company leave by virtue of its ‘entitlement to give instructions’ (Federal Labour Court, judgment of 12 October 1961 - 5 AZR 423/60; Dusseldorf Regional Labour Court, judgment of 20 June 2002 - 11 Sa 378/02; Rhineland-Palatinate Regional Labour Court, decision of 25 September 2012 - 10 Ta 149/12). While the literature recommends (in some cases only as a precaution) that the employer’s authority to issue instructions is included in the employment contract, including such a caveat does not seem necessary since the employer can unilaterally, i.e. against the employee’s wishes, order leave for urgent operational reasons anyway. It must therefore also be possible for the employer to order leave uniformly and collectively for its business. In addition, the current coronavirus-related economic crisis can constitute a ‘company interest’ which takes priority over the leave wishes of individual employees.

4. Outlook

Having summarised the employer's options for granting leave, the next article in this series will deal with the issue, which will be just as relevant for many companies in 2020, of under which circumstances the employer can ‘cancel’ leave that has already been approved or ordered. This question has recently become relevant not only in the healthcare industry in situations where pandemic-related staff shortages had to be avoided.