Can a company enforce a policy that annual leave must be taken within the leave year and not allow any carry forward of holidays?
Yes. The Organisation of Working Time Act 1997 (the Act) outlines an employee's statutory entitlement to take paid annual leave during a prescribed "leave year". The precise times at which such annual leave is taken is a matter for the relevant employer.
The rationale behind employees' annual leave entitlements is very important. The Working Time Directive 2003/88/EC (on which the Act is based) states that an employee must be entitled to actual rest with a view to ensuring protection of his/her health and safety. There is a responsibility on the employer to ensure the employees can use their annual leave during the relevant leave year – in order to rest and relax.
Ideally all annual leave entitlements should be taken within the relevant leave year. However, it is open to an employer to allow, within its annual leave policy, employees to carry over a certain amount of annual leave to the following leave year. As already mentioned, annual leave is for employees to rest and relax and so any such carryover must be used within the first six months of the next leave year.
Another scenario where statutory annual leave may be carried forward is certified sick leave. Bearing in mind the reasons for taking annual leave (rest and recreation) and the separate purpose for taking sick leave (recuperation), it is not possible for an employer to require an employee on sick leave to take their annual leave entitlement. On this basis, employees are able to carry over annual leave accrued during sick leave for a period of 15 months after the leave year in question.
Last year's Court of Justice of the European Union case of King v Sash Window Workshop (C-214/16) dealt with a related issue. It found that there is no limit to the carryover of accrued annual leave in circumstances where an employee cannot take leave due to the employer's refusal to pay for the leave in question. In this case the employer refused to pay the worker for annual leave because it considered he was self-employed rather than an employee.
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