Two German nationals (Kreuziger v Land Berlin and Max-Planck-Gesellschaft zur Forderung der Wissenschaften eV v Shimizu) brought claims in the German courts in relation to their employers’ refusal to pay them in lieu of accrued but untaken holiday on termination of their employment. Referring the combined cases to the European Court of Justice (ECJ), the German courts asked whether it was permissible for national law to allow employers to refuse to make these payments on termination.
The ECJ ruled that under EU law workers cannot automatically lose accrued holiday either at the end of the holiday year or on termination unless the employer has, in good time before the end of the relevant period, ensured that they were given an opportunity to take them and provided sufficient information about the circumstances in which their holiday would be lost. The ECJ also stated that employers must encourage workers to take their full holiday entitlement. The burden of proof is on the employer to show that it has done so.
What should employers do?
Employers should first of all be aware that this decision relates to the mandatory four-week holiday entitlement under the Working Time Directive (as implemented in the UK by the Working Time Regulations 1998 [WTR]). Any additional holiday beyond this period, including the 1.6 weeks granted to UK employees under the WTR and any additional contractually-agreed holidays, can still be lost.
There are several steps that employers should take following this decision by the ECJ. Firstly, they should review their holiday policies and procedures and ensure that staff holiday entitlement is clearly set out and explained. Appropriate and transparent revisions should be made to include sections outlining the consequences of not taking leave within the relevant time period, explaining the benefits of rest and relaxation, and encouraging staff to take time off.
Employers should inform their staff, at periodic intervals throughout the year, of the number of days of leave they have remaining and remind them that untaken leave may be lost. These reminders should be sent at least quarterly and can be simply by means of a company-wide email or intranet update. Two months before the end of the relevant time period, additional reminders should be sent to employees who have not taken at least four weeks’ leave. This will give them an opportunity to use their leave entitlement before it is forfeited, and may even have the welcoming side effect of avoiding numerous and overlapping holiday requests near the end of the holiday year.
It is important that employers keep a detailed written record of correspondence with their staff on this issue, as they will need to demonstrate that they have provided employees with sufficient information and given them an opportunity to take time off. This includes correspondence with employees on long-term sick leave who should be informed that they can take their holiday while on sick leave if they wish. Employers may also want to consider asking employees to acknowledge that they have been advised of the holiday policy and that they understand the circumstances in which unused holiday will be lost.
Katherine Newman is an associate, Philip Novak is a trainee solicitor, and Hans-Christian Mehrens is a trainee solicitor at Faegre Baker Daniels