Holidays – don’t ask don’t get?
Pay for accrued leave when employment ends.
All UK workers have the right to 5.6 weeks’ paid holiday per year, made up of 4 weeks’ holiday derived from the EU Working Time Directive (WTD) and a further 1.6 weeks’ holiday under the Working Time Regulations. On termination of employment, employees will expect to receive a payment in lieu of any accrued but untaken holidays – but do employers have to pay out for such holidays even if the employee never asked to take them? The European Court of Justice (ECJ) has provided some useful guidance.
The relevant cases originated in Germany, and concerned employers who refused to pay for accrued holidays, relying on national laws permitting the loss of rights to holiday (and an associated payment in lieu) where there is no request to take holiday before termination. The employees affected brought claims for holiday pay and the German courts asked the ECJ to advise whether or not its national law was compatible with employee rights under the WTD.
The ECJ held that the right to paid holiday, which is part of the EU Charter of Fundamental Rights, is directly enforceable against employers throughout the EU, and the WTD does not require an employee to request holiday as a condition of receiving a payment in lieu. The ECJ accepted that there is nothing in the WTD prohibiting the loss, under national law, of holiday which is not requested, but held that a worker could not be deemed to have lost such holiday automatically. For a worker to forfeit holiday, an employer would have to demonstrate that it had completed ‘all due diligence’ in enabling the worker to actually take their holiday.
For UK employers, the ECJ’s ruling means they must proactively encourage workers to take their holiday and inform them of their entitlement and its potential expiry clearly and in good time. If these steps are not taken, accrued but untaken holiday derived from the WTD may not be extinguished at the start of a new holiday year but instead roll over, resulting in potentially significant liabilities when employment is eventually terminated. For further advice concerning holidays and holiday pay on termination, please contact the FSP employment team.