Use it or Lose it – Annual Leave07 Nov 2018 // Insights
As the end of the year nears, Employment Solicitor Harry Abrams discusses annual leave.
As we approach the end of most employers’ holiday year, the European Court of Justice has provided a timely reminder, and further guidance to employers about annual leave and the “use it or lose it” principle. More often than not, employers are permitted to prevent employees from carrying over holiday, and that a payment in lieu of untaken holiday is only payable when an employee leaves. Despite these being accepted principles, we still recommend to companies that these points are expressly stated in employment documentation (including contracts of employment and staff handbooks), to avoid any ambiguity.
In the recent case of Kreuziger v Land Berlin and Max-Planck-Gesellschaft zur Förderung der Wissenschaften eV v Shimizu, the courts have put further obligations on employers in relation to accrued but untaken leave. It was previously understood that if an employee had not taken leave and had been able to take leave (i.e. was not on sick or maternity leave), then their accrued but untaken annual leave would be lost (if stated in their employment contract and/or staff handbook).
However, this recent case has stated that an employer is under an obligation to remind employees of the “use it or lose it” principle, if they are to rely on it. This reminder could be done individually or by a company-wide email or announcement. A failure by the employer to do so could mean that holiday is rolled over, even if this contradicts express contractual wording that intends to prevent any carryover. The court explained that an employer must encourage the worker to take any holiday owed, while informing the employee, accurately and in good time, of the risk of losing that leave at the end of the calendar year. If the employer errs on the side of caution and sends out a reminder in the summer, they may still have to send out a further reminder closer to the end of the year to fulfil their obligation.
It may be helpful for employers to send out reminders to employees about how many days they have remaining in their holiday allowance on a regular basis, perhaps quarterly. As this case would suggest, the more diligent an employer is with reminders throughout the year, the better positioned they will be to inform an employee that they have lost their accrued but untaken leave.
Helpful reminders from companies may be particularly pertinent for new joiners who may be unsure about their pro-rated holiday allowance, as well as the company’s practice in relation to any festive shutdown. Explaining how the company’s holiday system works will have a dual benefit of making the employee feel welcome and integrated, whilst also showing the work-life culture at a company.
As we now enter the festive countdown, employers are advised to send out reminders to their employees in the coming weeks that any untaken holiday will be lost, if not used by 31 December. It is only by taking this extra measure, that it will be without material risk for employers to prevent any carryover, if holiday is not taken.
Logistically, the earlier this email is sent out to the workforce, the better. This way, employers can prevent a whole raft of overlapping annual leave requests, arriving in the lead up to Christmas.