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Holiday – Use it or Lose it?

Mr Shimizu was employed by Max-Planck under several fixed-term contracts between 1 August 2001 and 31 December 2013. He was informed that the employment relationship would end and so he was invited to take his annual leave before this time. Mr Shimizu took only 2 days leave before termination after which he brought claims for unpaid annual leave for a 2 year period. 

If a worker doesn’t ask to take their annual leave during a leave year, is the right to that leave lost at the end of the year?

Mr Shimizu was employed by Max-Planck under several fixed-term contracts between 1 August 2001 and 31 December 2013.

Max-Planck wrote to Mr Shimizu in October 2013 to inform him that his services were no longer required and he would no longer be employed. They invited him to take his leave before the employment relationship was terminated but they did not force him to take his holiday on set dates. Mr Shimizu took only two days’ leave before leaving.

Due to him not taking his annual leave, Mr Shimizu wrote to Max-Planck to seek payment for 51 days paid annual leave for 2012 and 2013 which had not been taken. This was unsuccessful as Max-Planck’s policy (and German Law) stated that holidays could not be carried over from one year to another.

The Tribunals decided in favour of Mr Shimizu and Max–Planck appealed to the Court of Justice for the European Union.

Max-Plank argued that Mr Shimizu did not exercise his right to annual leave during the reference period concerned, and so he loses, at the end of that period, the days of paid annual leave. Accordingly, he was not entitled to payment of an allowance in lieu of annual leave not taken for previous years.

Decision

The Court upheld the previous decision setting out that it is down to the employer to ensure that a worker is in a position to take annual leave and they must encourage them to do so, formally if necessary. They stressed that it is important to avoid a situation where the burden of the right to take annual leave rests solely on the worker. The employer must also, accurately and transparently, inform the employee in good time that if they do not use their holiday they will lose it and it cannot be carried over to another period. The burden of proof is with the employer to show that they have “diligently” enabled the worker to take annual leave and informed them of the policies around carry-over.

Comment

This case suggests that more responsibility is placed on an employer to ensure transparency around holiday pay policies, in particular the “use it or lose it” rule.

Workers must be notified that they cannot carry over holidays to another period. Employers should ensure that this is covered in employment contracts and perhaps procedurally remind workers of any policy.

More case law is required on this particular topic to determine exactly what ‘diligently’ giving the worker opportunity to take their holiday means. In any case, it will almost certainly only apply to the first 20 days of statutory annual leave which comes from the European Working Time Directive.  The judgment is slightly at odds with domestic decisions which have endorsed the “use it or lose it” position.

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