The concept of a statutory minimum holiday entitlement has been with us since the introduction of the Working Time Regulations 1998. As with most of our employment laws, these Regulations came about to implement an EU Directive.
When the Government brought in the Working Time Regulations 1998, it was clearly stated that statutory annual holiday leave could not be rolled forward from one holiday year to the next. In effect, workers had to “use it, or lose it”. Because of the way the Regulations were drafted, if a worker or employee was unable to take their full holiday entitlement (for example they were on long term sick leave), they lost their accrued holiday entitlement at the end of that holiday year, and started from scratch in the next.
In 2009, case law from the European Court of Justice appeared to decide that, under the EU Working Time Directive, workers should be permitted to carry forward accrued annual leave indefinitely, if long term sickness absence had prevented them from taking it – even if that meant rolling the accrued holiday entitlement over to the next holiday year, so that it could be taken then. This came as quite a shock to many businesses, because it was completely at odds with how the Working Time Regulations had been drafted. It also meant, for example, that if a full time employee had been absent from work for 2 years due to illness, they could have accrued up to 28 days of holiday entitlement for each year they had been off work. If they returned, they were entitled to take this leave in addition to their standard entitlement. If their employment was brought to an end, then they were entitled to be paid for the accrued but untaken leave entitlement.
A new opinion from the Advocate General of the Court of Justice suggests that the right to carry forward untaken leave may in fact be more limited. The opinion, given in the German reference KHS AG v Schulte, is the latest instalment in the long-running saga of annual leave entitlement and sickness absence. Though the opinion is currently not available in English, the Court's press release has summarised its conclusions. The Advocate General has concluded that permitting indefinite carry over of annual leave goes beyond the strict requirements of the Directive. The Advocate General had regard to the health and safety objective behind annual leave and considered that this was not furthered by the indefinite accrual of rights. The opinion suggested that the Directive permits Member States to legislate for holiday entitlement, and the corresponding right to payment in lieu on termination of employment, to expire after a set period. While Member States are free to implement their own time limits, the opinion considered that expiry 18 months after the end of the year in which leave accrues would be an acceptable guideline.
This opinion is not binding on the European Court, but in the majority of cases the Advocate General’s opinion is followed. If it is, then most businesses will no doubt welcome the introduction of a longstop date.
Practical Tip:
Dealing with holiday entitlement should be a simple matter. In most cases, if accrued leave is not taken before the end of the holiday year, it is lost. That is not the case where accrued holiday could not be taken because of sickness absence or for time off for family friendly rights (for example maternity or paternity leave). Do take advice, because the last thing you want is for a simple matter to turn into an unexpected claim.