Leave following termination: The invalidity of blanket leave clauses in employment contracts
Placing employees on leave following their dismissal is a commonly used measure in practice. It enables employers to avoid conflicts, safeguard business operations and protect sensitive information.
Many companies rely on blanket exemption clauses in employment contracts. However, recent case law from the Federal Labour Court (BAG) shows that such standard provisions can be legally problematic – with significant practical implications.
What does ‘leave of absence’ mean in the event of redundancy?
An exemption refers to the unilateral or mutually agreed release of an employee from the obligation to perform work, whilst the employment relationship continues.
In practice, a distinction is made between:
- revocable exemption
→ the employer may call the employee back to work at any time - irrevocable release from duty
→ the employee is permanently exempt from performing their duties
This classification is relevant not only to day-to-day work, but also to issues relating to the calculation of annual leave and remuneration.
Key finding of the Federal Labour Court (judgement of 25 March 2026 – 5 AZR 108/25)
The Federal Office of Public Health (BAG) has made it clear that blanket indemnity clauses in employment contracts are subject to strict scrutiny.
Key message:
Standardised clauses which allow for unilateral exemption without clear differentiation may be invalid.
Particularly problematic are clauses which:
- are worded too vaguely
- does not contain any clear rules on how holiday entitlement is calculated
- do not distinguish between revocable and irrevocable exemption
- unfairly disadvantage the employee
The BAG is thus significantly tightening the requirements for the drafting of contracts.
What does this mean in practice?
For employers, this decision means that the standard contract templates used to date should be scrutinised.
An invalid indemnity clause may result in:
- Holiday entitlements cannot be effectively deducted
- Entitlement to remuneration continues
- additional financial burdens arise
This can have significant financial implications, particularly where notice periods are longer.
Furthermore, an unclear exemption leads to uncertainty in the ongoing employment relationship – for example, regarding whether or not the employee remains obliged to perform their duties.
Practical tip: Ensuring leave of absence is legally compliant
Employers should not regulate time off work on a blanket basis, but in a considered and structured manner.
Important points are:
- a clear distinction between revocable and irrevocable exemption
- an explicit provision on the crediting of annual leave
- clear and easy-to-understand wording
- where applicable, additional individual agreements on a case-by-case basis
Accurate documentation also provides legal certainty.
Avoid typical mistakes
In practice, similar errors crop up time and again:
- Use of outdated or overly general contract clauses
- A lack of coordination between time off work and holiday entitlements
- unclear communication with the employee
These issues can be avoided by planning ahead.
Conclusion
Exemptions remain an important tool in employment law, but they require careful and nuanced structuring. Current case law makes it clear that one-size-fits-all solutions are no longer sufficient.
Employers should review the terms of their contracts and make deliberate use of leave of absence provisions to minimise legal and financial risks.
If you have any questions on this or other topics, please contact us - we will be happy to advise you.
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