The first appellant did not take any annual leave for the last 5 months of his employment and he requested an allowance in lieu of his accrued untaken annual leave. The request was refused.

The second appellant was invited by his employer to take his remaining leave, but he took only two days and requested payment of an allowance in lieu. This was also refused.

The ECJ was asked whether the right to an allowance in lieu of paid annual leave may be precluded where the employee failed to apply for the leave they were entitled to, although they had been in a position to do so.

The ECJ noted that the holiday pay required by Article 7 of the Working Time Directive was intended to allow the worker to actually take the leave to which he is entitled. Therefore, any employer practice or omission that might deter a worker from taking annual leave is incompatible with the purpose of the right to paid leave.

The court held that the burden of proof rests with the employer who must show that it exercised all due diligence to enable the employee to take paid annual leave. However, if an employee deliberately refrains from taking their entitlement and understands the consequences, then Article 7 does not preclude loss of the right or the allowance in lieu.

Practical Lessons

This decision has serious implications for the so-called ‘use it or lose it’ provisions of the Working Time Regulations 1998, which can see employees losing any undertaken annual leave.

The ECJ in this case essentially warns all employers (private and public sectors) that they have an obligation to provide sufficient information to employees to allow them to actually exercise their right to leave. If an employer can show that it has met its obligations, and the court is satisfied that the employee deliberately decided against taking their holiday and was aware of the consequences, then the employee will lose the right to paid annual leave or the payment in lieu on termination.

Employers need to decide how best to approach this issue but sending timely reminders to staff of the leave they have left is surely recommended. If employers fail to do so, then staff may well be entitled to carry over untaken leave indefinitely.
http://curia.europa.eu/juris/document/document.jsf?text=&docid=207328&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=1961784