The European Court of Justice (ECJ) case of Kreuziger v Land Berlin (Kreuziger) has considered payments in lieu of holiday where employees:
have not applied for annual leave even though they could have done so; or
have not been able to exercise their right to paid annual leave before termination of their employment.
Mr Kreuziger did not take any paid annual leave from 1 January 2010 until the end of his employment on 28 May 2010 and requested an allowance in lieu of the paid annual leave. Mr Kreuziger’s employer maintained that he had “lost” the holiday not taken prior to termination of his employment.
The ECJ found against the employer and held that the obligation to take holiday does not rest entirely with an employee. Employers should ensure that staff have the opportunity to take holiday by encouraging them and informing them of the right to take holiday, the holiday to be taken and that if it is not taken it will be lost.
Practical considerations
Holiday accrual - Kreuziger only applies to an individual’s four week (pro-rated for part time workers) minimum holiday entitlement under the Working Time Directive (WTD) and not any additional entitlement under the Working Time Regulations 1998 (WTR) or additional contractual holiday entitlement. All employers should ensure their contracts state that during the course of any holiday year, individuals will take their WTD and WTR holiday entitlement before taking any additional contractual holiday entitlement.
Notice periods and holiday carry over - Employers will need to monitor staff holiday entitlements and send regular reminders to staff of the date by which their holiday should be taken, and that any unusued holiday will be lost. This is very important for staff who have carried over previous years’ holiday entitlement (eg due to maternity or shared parental leave). For individuals working their notice, it is recommended that employers advise individuals that they should take holiday or lose it at the end of the employment relationship.
Long-term sick leave - Employers should also advise staff on long-term sick leave of their right to take holiday and the potential for it to be lost if it is not taken. If employers are able to show that they have advised staff accordingly, it will limit the right of carry over for staff on long-term sick leave.
