Outstanding Holiday Entitlement: Employers’ Duties

Employers, including law firms, should note a recent ruling of the European Court of Justice on employees’ rights in relation to outstanding holiday entitlement under EU law.

Two German cases were heard together. In the first case, a paid legal trainee refrained from taking paid annual leave towards the end of his traineeship. When his training ended, his request for an allowance in lieu of his outstanding holiday leave was refused. In the second case, the employer invited its employee to take his outstanding leave, but in the event, he took just two days and requested payment of an allowance in lieu of the leave not taken. This was refused.

At issue for the ECJ was whether or not the German law, which effectively says of holiday entitlement, ‘use it or lose it’, was compatible with the Working Time Directive.

What did the ECJ decide?

The ECJ made clear that workers cannot automatically lose their acquired rights to paid four weeks’ annual leave under the Directive on the basis that they do not apply for leave. However, if an employer can prove the worker deliberately and knowingly refrained from taking their paid annual leave after being given the opportunity to do so, EU law does not preclude the loss of that right. Nor does the law preclude a corresponding absence of an allowance in lieu if the employment relationship ends.

The ECJ, recognising that employees are the weaker party in an employment relationship, made clear that workers must be given the opportunity, in particular through the provision of adequate information, to take the outstanding holiday leave in good time.

What does this mean?

There are various reasons why employees may not take their full holiday entitlement, such as pressure of work, long-term sickness, or simply no need or desire to take a holiday from work. Whatever the circumstances, employers should remain alert to what, if any, holiday entitlement has not yet been taken by its workers within good time (for instance, within two or thee months before the end of the organisation’s holiday year).

If employers wish to avoid a worker carrying over their holiday, or expecting payment in lieu, they must then invite or request them to take their outstanding holiday. The burden of proof is on the employer to show this has been done. This requires positive action on its part to demonstrate that it has taken steps to persuade employees to take their unpaid leave, for example, a timely letter or email setting out the days taken and the remaining days of leave; and formally requesting workers in writing to take their leave before a certain date. Good practice would require employers to keep a record of employees’ responses to such requests.

If workers are not asked to take their outstanding leave, employers may well find that they will be entitled to carry it forward to the following year, and in some cases request payment in lieu of outstanding holiday leave not yet taken.

Note that this ruling only applies to the four weeks of annual leave that workers are entitled to under EU law, not any additional holiday entitlement under UK law. It also applies whether the employer is a private or public business or company.

1. Kreuziger v Land Berlin and Max-Planck-Gesellschaft v Shimizu Case C 684/16



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