Raising the bar for 'use it or lose it' holiday entitlement

8 Nov 18 by Nina Robinson

The recent CJEU decision in Max-Planck-Gesellschaft v Shimizu shows that employers are required to “diligently” bring to the attention of employees the fact that annual leave entitlement will be lost if not taken during the leave year. In this case, the Claimant had not applied to take his full annual leave entitlement during the leave years in question, and later sought to claim for unpaid holiday from previous leave years.

Many employers apply a ‘use it or lose it’ policy to annual leave and this is lawful under the Working Time Regulations 1998. Statutory annual leave entitlement should be used during the leave year in respect of which it relates or otherwise it may be lost. This is subject to certain caveats where the statutory annual leave entitlement must be allowed to be carried forward into subsequent leave years (including where the employee has been unable to use the full entitlement during the leave year in respect of which it relates, due to maternity leave or sickness absence).

However, in the Shimizu case, the CJEU held that the Working Time Directive requires that if a worker does not exercise the right to paid annual leave in any year, leave should not automatically be lost unless the employer has 'diligently' brought it to the worker's attention that leave will be lost, the burden of proof falling on the employer. Employers do not need to require employees to take leave, but must inform them accurately and in good time of the right.

The use of the word diligently arguably raises the bar in relation to what would be expected of an employer before they were able to apply the use it or lose it principle to statutory annual leave entitlement. Often this is set out in policy or within the employment contract but this may not be sufficient, without more, to meet the definition of diligently and therefore prevent claims from employees that their statutory annual leave was in fact not lost and instead carried forward.

With the end of the leave year approaching for many employers (where the leave year ends on 31 December annually), this may serve as a timely prompt to remind all employees and workers that if they have annual leave entitlement to use they should do so before the end of the current leave year, or this may be lost subject to certain specific exceptions.


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Post by Nina Robinson

Director, ESP Law Ltd

Nina is an accomplished employment solicitor with over 15 years’ post-qualified experience at leading UK law firms. Nina initially qualified as a corporate solicitor at Addleshaw Goddard in 2005 and since 2006 practised employment law exclusively, providing advice to employer customers at both DAC Beachcroft and Ward Hadaway Solicitors. Nina has experience of advising a varied portfolio of employer customers, including retail and restaurant groups, financial services and media industry customers on all employment issues.