The good news for local governments though, is that they only need to pay the compensation when they are found responsible for the fact that parents did not secure a day care spot for their child.
Germany implemented a law in August 2013 that guarantees all children the right to day care from their first birthday. But in some parts of Germany, there are still not enough nursery places for all children.
The ruling came about after three women from Leipzig sued authorities in the eastern city.
Each of them had looked for a nursery spot soon after the birth of their children, saying they would need it once they returned from 12 months of parental leave.
But the city was unable to find nursery spots for their children, meaning the mothers could not return to work until months later.
The court ruled that Leipzig authorities must compensate the women for their loss of income, leading to likely payouts of €2,200, €4,500 and €7,300.
The ruling is an important victory for the mothers. However, previous rulings on the case had not looked into whether the city of Leipzig was at fault for the delays. A lower court will now look into whether the city is responsibility.
The judges said that authorities could be exempted from culpability if there were not enough qualified nursery staff available, or if a building company had gone bust. But financial constraints would not be accepted as an excuse.
The case opens the way towards compensation for other parents who have not been able to gain nursery places for their children.