Two matters recently before the European Court of Justice (CJEU), those of Max Planck Gesellschaft v Shimizu and Kreuziger v Land Berlin, have provided useful clarification on the law relating to carried over holiday entitlements. Unless an employer has ensured ‘specifically and transparently’ that a worker has been given opportunity to take leave, a worker who has not asked to take their leave entitlement may carry it forward.
The background to these cases is that German employment law states that at the end of a worker’s employment payment in lieu of accrued holiday need only be made if the employer has prevented the employee from taking the leave entitled to them. The result is that workers have had to ask to take all leave before the end of their employment.
Neither Mr Kreuziger nor Mr Shimizu, who were the departing employees in each matter, had asked to take outstanding holiday before they left. Mr Kreuziger requested payment for outstanding holiday accrued over five months, whilst Mr Shimizu requested payment for 51 days’ holiday spanning two leave years. Their employers refused, claims were brought and the German Federal Labour Court referred questions to the CJEU.
Under the Working Time Directive workers in EU countries have a statutory entitlement to paid leave each year. They cannot be compelled to take it, but under most normal circumstances it cannot be carried forward. However, in the opinion of the CJEU a worker should not automatically lose four weeks untaken annual leave unless their employer has first brought it to their attention ‘diligently’ that this will happen.
This CJEU decision may have far-reaching consequences. Henceforth the prohibition on carrying leave entitlement forward will apply only when the employer has exercised all necessary due diligence to ensure that a worker is aware that they are entitled to leave. It must be made clear to workers, when there is no legitimate reason why they may not take leave, that if they decline to do so they will lose their entitlement.
UK businesses will need to take note of these rulings. They are based on the principle that in any employment relationship the employee is the weaker party. Therefore the onus is on the employer to ensure employees know their rights, to encourage them to take their leave, to do nothing to discourage them, to have a clear policy in place that makes it clear when leave entitlement expires, and to ensure that workers are made aware of the policy in a timely manner so that they may act as they see fit.
It is important to note that these rulings relate to the first four weeks out of a total of 5.6 weeks statutory holiday entitlement. Employers are still entitled to take a ‘use it or lose it’ approach to the remainder. Employers wishing to operate a policy of not allowing leave to be carried forward will need to ensure, and be able to prove, that they have made all reasonable efforts to make employees aware of the consequences of not taking leave and have provided a fair opportunity to take it. It does not apply to staff who are ill or are on maternity leave as they will be able to carry over in any event.
A good policy would be a system to remind workers through the holiday year of what holiday they still have owing to them, and encouraging them to take it. The German courts will now determine whether Mr Kreuziger and Mr Shimizu should receive compensation for untaken leave.
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