Use it or lose it losing its usefulness
Thursday 29th November 2018
According to the ECJ in the cases of Kreuziger v Berlin and Max-Planck-Gesellschaft zur Forderung der Wissenschaften eV (‘MPG’) v Shimizu, national legislation which precludes a worker from receiving payment in lieu of untaken holiday is incompatible with the Working Time Directive 1998 (‘WTD’), and is unlawful.
Article 7 of the WTD broadly provides that every worker is entitled to a least four weeks paid leave per year, and that this minimum period must not be replaced by an allowance in lieu, except upon termination of the employment relationship.
Mr Kreuziger was a legal trainee who took no annual leave during the final few months of his traineeship. When his employment terminated, he asked for an allowance in lieu of his accrued, but untaken, holiday. This was refused by his employer.
Mr Siminzu was invited by MPG to take his annual leave (totalling 53 days) two months before the employment relationship ended. MPG did not specify when the leave should be taken, and Mr Shiminzu took only two days during this time. He requested the remaining days be paid in lieu, which was also refused.
Both cases were referred to the ECJ on appeal to the national courts.
Decision and comment
The ECJ held that a worker will not automatically lose their right to an allowance in lieu of untaken leave upon termination, or at the end of a particular reference period, unless the employer has provided them with sufficient information about their right to paid holiday and given them the opportunity to take such leave.
For employers this means that it is no longer appropriate to adopt a blanket use it or lose policy. Holiday will only be lost where the employer can show that it has ‘exercised all due diligence’ in allowing the worker to take their leave, and they still refuse it while knowing the consequences.
A holiday policy in a handbook is a good opening position, but it would be advisable to also offer reminders and updates at appropriate periods during the holiday year. This will be particularly the case for workers with significant holiday entitlement remaining. It will also be important to plan ahead where employers stipulate times that cannot be taken as leave, for example December for retail and hospitality businesses.