Workers who do not take holiday do not automatically lose it at the end of the holiday year
The ECJ has handed down an important decision on carrying over holiday with significant consequences for employers. In two cases referred by the German Courts Kreuziger v Land Berlin and Max-Planck-Geselleschaft v Shimizu the ECJ held that under the Working Time Directive a worker who does not seek to take holiday does not automatically lose it at the end of the holiday year. This means that on termination a worker may be entitled to a payment in lieu of accrued and untaken holiday from the current and previous holiday years. In one of the referred cases, the worker had only taken 2 days holiday and asked for pay in lieu of 51 untaken days from 2012 and 2013.
The Working Time Regulations (“WTR”) provide that any unused statutory leave will be lost the end of the holiday year. The Courts have held that the exceptions to this are in the case of long-term sickness absence or maternity leave, where the worker cannot take leave, or where the employer has unlawfully failed to provide for paid holiday. However, in contrast, in this situation the worker is ostensibly in a position to take holiday but for whatever reason does not ask to do so.
The Court considered that because a worker is the weaker party and to ensure they are not dissuaded from exercising their right to take holiday by suffering detrimental consequences, the onus should be on the employer to exercise “due diligence” to enable the worker to take their paid holiday entitlement. The employer is not required to force the worker to take leave but instead should encourage the worker to take it and give them sufficient and accurate information in good time about the risk of losing their leave at the end of the holiday year if they fail to take it. The Court also held that if the worker deliberately refrains from taking holiday in full knowledge of the consequences, after being given the opportunity to exercise the right to annual leave, the Directive does not preclude loss of the right or the allowance in lieu.
- This decision puts the onus on the employer to manage holiday by “specifically and transparently” ensuring that the worker is in a position to take the holiday he or she is entitled to.
- It is likely to affect organisations where the culture is not to take holiday or the worker feels under pressure from volume of work such that taking leave is very difficult. If a worker has a significant build-up of untaken leave, this could indicate other issues e.g. with workload or work-related stress, which also need to be addressed.
- Employers should ensure there is a system in place for monitoring each year how much holiday workers have left with sufficient time to remind them of this and enable them to take it. Ideally, this should be at least 3 months or more before the end of the holiday year.
- Workers should be specifically encouraged to take holiday, formally if necessary, and made aware of any limits on carry-over and that they might lose leave if they do not take it. Line managers and/or HR should ensure they keep a record of any conversations.
- This decision applies to the four weeks leave available under the Directive and will override any contractual terms which restrict carrying forward leave. It is still possible to limit carrying forward the extra 1.6 weeks leave under WTR and any additional contractual leave. It is also advisable to have a provision in the contract specifying that the four weeks leave under the Directive is deemed to be taken first.
- It is possible under the WTR to give workers notice to take holiday and this could be an option for employers to consider in the case of workers with a lot of leave left to take late in the year.
- Employers should remember this applies to workers as well as employees.
- It is not clear from the decision how many years can be carried forward although in decisions on long-term sickness the Courts have decided that between 15 and 18 months after the end of the relevant holiday year was appropriate.
For more information please contact David Green.
Sponsor Licence Compliance: Key considerations & how to be audit ready
Join us for the third in our series of mini webinars on post Brexit immigration about sponsor licence compliance.
The Future of Property Careers
Join to our panel discussion and Q&A with industry leaders on the range of opportunities within the property and construction sector.
UK SPACs: could changes to the UK Listing Rules spark an increase?
SPAC listing popularity has increased. Could the UK be the next hotspot following proposed changes to the Listing Rules?
Sustainable Investing: From ESG Integration to Impact Investing
We have a wide perspective on the range of issues that fall within the spectrum from ESG to impact investing.
Liability for costs of repair (City of London v. Leaseholders of Great Arthur House)
Oliver Park writes an article for Lexis®PSL on a property dispute case.
Do You Believe?
New tax on property developers - consultation paper published
The government published a consultation paper on the design of the new residential property developers tax.
Procuring modular housing: Is MMC becoming mainstream?
Is Modern Methods of Construction becoming mainstream? Read what it means for Development and Procurement here.
Dual class share structures: how do they work and what are the pros and cons?
Dual class share structures allow a shareholder, for example the founder, to retain voting control over a company.
Q&A: Talking the telecoms talk
Georgina Muskett and Jonathan Wills answer queries on Electronic Communications Code agreement.
Property Patter: Navigating the complexities of Pharmacy Property
Pharmacy property is a specialist area which contains many traps for the unwary.
COVID-19 Vaccination – can an employer make it compulsory for employees?
We review what legal issues to take into account when considering to make vaccination compulsory as an employer.
Linking ESG and Executive Pay
How does a business go about embedding a focus on strong ESG performance into the structures and culture of its organisation?
National Security and Investment Act granted Royal Assent
The Act establishes a new regime for the review of mergers, acquisitions and other transactions that could threaten national security.
Recent Trends In Firewall Legislation: BVI, Bermuda And Gibraltar
Charles Russell Speechlys advises Waverton on acquisition of Cornerstone Asset Management
Established in July 2010 and with offices in Edinburgh and Glasgow, Cornerstone offers wealth management and financial planning advice.
What do the new Debt Respite Scheme Regulations mean for Landlords and Tenants?
This will provide legal protection from creditors in the form of either a breathing space or a mental health crisis moratorium.
Charles Russell Speechlys promotes five to Partner
The promotions are effective 1 May 2021 and are accompanied by one Legal Director and 15 Senior Associate promotions.
Risk allocation in commercial leases: the High Court considers rent suspension, insurance and frustration arguments
Read our summary of the full judgement on the latest Covid arrears case.
Charles Russell Speechlys boosts private wealth offering with the hire of an international tax team
Robert Reymond will be joined at the firm by Leigh Nicoll, Emma Tyrrell and Oliver Cooper.