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Holiday – use it or lose it? Not quite….

Employers must provide ‘adequate notice’ to avoid future claims

In an important European ruling a German employee has won a claim for unpaid holiday pay arising from holiday he failed to take some 6 years ago.

Under German law, similarly to the UK, there is no automatic right to carry over leave and here in the UK many employment contracts state that holiday not taken at the end of the holiday year will be lost, though there are some notable exceptions to that rule we will cover in a moment.

In this case the European CJEU court ruled that the employee was entitled to compensation for his lost holiday because the employer did not take adequate steps of its own to ensure that the employee was aware that he would lose his holiday.

Given that European legal decisions will continue to apply to the UK until Brexit (and any transition period that may apply after Brexit) this case has UK significance, so what can we draw from it?

The ‘use it or lose it’ rule favoured by most employers may continue to apply, but employers should ensure that employees are given adequate notice of the risk of losing their holidays and time to take their untaken holidays – being silent on the issue is likely to result in any future claim for untaken holiday being successful.

Do employers need to force employees to take their holiday if the employees don’t want to?

No, but they do need to take adequate steps to ensure employees are aware that if they don’t take it they will lose their holiday.

What ‘adequate notice’ should employers give?

As an example, a written email at the half way point in the year and another before the final quarter warning the employee that they need to take their outstanding holiday should suffice.

Can an employer force an employee to take holiday?

Yes, providing the right to require the employee to take leave is not unreasonably enforced and provided sufficient notice is given – normally employment contracts will provide details.

Aside from inadequate information are there any other circumstances when the use it or lose it rule will not apply?

Case law has determined that the use it or lose it rule will not apply to cases of long term sickness absence when the employee wasn’t able to take holiday because of their illness. In these cases an additional 15 months should be applied to the holiday year to enable the returning employee to take their holiday. The use it or lose it rule does not apply to maternity leave either (during which holiday continues to accrue) and employers will normally make arrangements with their employee to take their accrued holiday immediately before their return to work.

Are there any other quirks employers should be aware of?

The right to paid holiday stems from European legislation which requires member states to give 4 weeks paid holiday for the purposes of rest and recuperation. In the UK the government chose to gold plate this to 5.6 weeks.  Many UK employment contracts will state that in certain circumstances (e.g. in the case of long term illness) holiday will only accrue at the lower European minimum of 4 weeks per annum.

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