Untaken Annual Leave-Is a Policy of ‘Use it or Lose it’ Lawful?

stressed employee

“Use it or lose it” is a policy adopted by a great number of employers in respect of annual leave. But are they legally entitled to do so?

Two recent decisions from EU law clarifies the position.

In Kreuziger v Land Berlin the employee, Mr. Kreuziger, a legal trainee, never took annual leave. When his traineeship came to an end he sought payment in lieu of the leave he had not taken. Land Berlin refused this request and Mr. Kreuziger took legal proceedings in the German Courts.

A similar case came before the German courts in Max Planck v Shimizu. The employee had accumulated 51 days annual leave over a 2 year period and requested that he be paid for this untaken leave when his employment ended.

The German Courts referred the issue to the European Courts in the form of the Court of Justice of the European Union (CJEU) and asked the question whether an employee who fails to take annual leave is entitled to be paid in lieu of the leave foregone, even in a situation where there was nothing preventing the employee from taking the leave.

CJEU

The Court of Justice of the European Union (CJEU) held that it was acceptable for employers to adopt a “use it or lose it” policy in circumstances where there is nothing preventing the employee from taking the leave and the employer encourages the employee to take the leave. But the employer must be able to show that he encouraged the employee to avail of the annual holidays.

It also held that Article 7 of the European Working Time Directive only provides an entitlement to be paid for leave accrued but not taken where the employment is terminated.

In the normal course of employment the employee has no entitlement to give up the annual leave and expect to be paid instead.

Takeaway for employers and employees

  1. Employers do not have to force employees to take annual leave but they should certainly encourage them and document those efforts.
  2. The employee cannot let the leave go untaken and accumulate and expect to be paid.
  3. If the employee is not encouraged or permitted to take leave she will be entitled to be paid in lieu of all untaken leave.

Read the full case of the Court of Justice here: Case C‑619/16 Sebastian W. Kreuziger v Land Berlin