March 1, 2019
Most people will have heard the phrase “use it or lose it” when it comes to taking annual leave. The principle behind it is that if you do not take all your annual leave within the holiday year, you lose the right to take the time off. Some employers will allow a small amount of leave to be carried over to the following holiday year provided that it is taken within a certain amount of time within that new holiday year. There are exceptions so the principle such as if an employee has been absent due to ill health and therefore unable to take their full entitlement.
In addition, it has been clear that you cannot be paid in lieu of your untaken holiday unless on termination of your employment.
Two recent cases from Germany have been considered by the European Court of Justice (“ECJ”) that question whether the “use it or lose it” principle is quite so straightforward. In the cases of Max-Planck-Gesellschaft v Shimuzu and Kreuziger v Berlin these issues were considered and the ECJ said that unless the employer could demonstrate that it had encouraged its employees to take their annual leave throughout the year, an employee could not lose accrued annual leave simply by not having taken it.
To complicate matters further, as this is a European ruling, the likelihood is that the ruling only applies to the 4 weeks annual leave afforded by EU law (the UK provides a further 1.6 weeks totalling 5.6 weeks minimum holiday) and so in practice as long as an employee takes at least 4 weeks annual leave, these rulings should not have an impact. The decisions do, however, act as a prompt to employers that they should be taking steps to ensure that their employees are taking their annual leave by providing reminders or updates throughout the year to employees who have a lot of annual leave remaining.