Employers must be pro-active in enabling staff to take holiday, ECJ rules

The European Court of Justice has ruled that a worker who does not ask to take their holiday does not automatically lose it at the end of the holiday year.   

Facts

In Kreuziger v Land of Berlin a legal trainee did not take any holiday in the last months of his traineeship.  Following the end of his employment he requested a payment in lieu of the holiday he had not taken.  His employer refused.  

In Shimizu v Max-Planck-Gesellschaft, two months before the end of his employment, Mr Shmizu’s employer invited him to take his remaining holiday.  He took only two days and claimed payment in lieu of 55 days untaken holiday (some of which related to the previous holiday year).  His employer refused.

Both individuals challenged their employer’s refusal in the German courts.  The German Courts considered that the right to carry over untaken holiday and to a payment in lieu on termination only applied where the individual had been unable to take their holiday for reasons beyond their control.  It did not apply where the worker had simply chosen not to take their holiday. They asked the European Court of Justice (ECJ) whether this complied with the Working Time Directive (WTD).     

Decision

The ECJ ruled that a worker must be afforded an effective opportunity to take their holiday before they lose it.  This means that the employer must encourage the worker to take the holiday and inform them accurately and in good time that if they do not take it they will lose it.  However, if an employer is able to prove that it did this and the worker chooses not to take their holiday in full knowledge of the consequences, national law can provide that the worker loses the holiday at the end of the leave year and loses any corresponding entitlement to a payment in lieu on termination.

Implications

Employers must ensure they give staff the opportunity to take their holiday.  This does not mean that they must force staff to take it but they will have to encourage them to do so. This is likely to entail regular reminders during the course of the holiday year that they should be taking their holiday, perhaps providing details of the untaken holiday entitlement, and warnings that if they do not take it they will lose it.  Where an employer does not do this, the worker will be able to carry over their untaken holiday entitlement into a subsequent holiday year.  This is despite the “use it or lose it” approach in the Working Time Regulations 1998 (WTR) - which provide that holiday must be taken in the leave year in which it accrues.  Workers will also be entitled to a payment in lieu of their untaken holiday on termination, including holiday carried over from a previous holiday year.  

Up until now, the circumstances in which unused holiday may be carried over have been limited to cases where the worker has been unable to take it in the leave year in question, for example due to being on sick leave, maternity leave or because the employer has not provided for paid holiday in the contract. This case appears to extend that principle to cases where a worker has not taken holiday and the employer cannot prove that it gave them the opportunity to take it.  There will no doubt now be litigation over whether an employer has given a worker an effective opportunity to take holiday and the burden of proving that they have will be on the employer.  

As for employees on sick leave, it is likely that there will be a limit on the carry over period so that holiday will be lost if not taken within 18 months of the end of the leave year in which it accrued.  The decision will also only apply to the basic four week holiday entitlement under the WTD and not the additional 1.6 weeks’ holiday under the WTR.