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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