Annual Leave – Loss of Right to Paid Annual Leave

26 January 2010

Introduction

The recent case of Lyons v Mitie Security (Lyons) has provided further guidance on the “hot topic” of annual leave. The claim itself was one of constructive unfair dismissal. However, the “last straw” incident related to the employer’s failure to pay the employee for a period of annual leave.

Regulation 13A(3) of the Working Time Regulations 1998 (WTR) entitles workers to 5.6 weeks annual leave. Under Regulation 13(9)(a) that leave may only be taken in the year in respect of which it is due (subject to the recent cases we have reported on, in particular Stringer and Pereda). Under Regulation 15, a worker may take annual leave by giving notice to the employer specifying the days on which he wishes to take the leave. Under the WTR, the notice given must be double the period of the leave that is to be taken. For example, if a worker wants to take five days’ annual leave, notice must be given ten days in advance of the first day of the leave. These notice requirements can be varied in an employee’s terms and conditions of employment.

Facts

In the Lyons case, the Claimant was employed as a security officer on an hourly basis with no guaranteed minimum hours per week. The annual leave year ran from 1 April to 31 March. The Claimant’s contract of employment entitled him to four weeks’ paid annual leave. Applications for annual leave had to be made by completing a holiday request form, where possible, four weeks prior to commencement of the holiday. The contract also specified that all holiday must be taken during the relevant holiday year and that no holiday could be carried over into the next year. On 6 March 2008, Mr Lyons sent a fax to his employer asking to be paid for his remaining 9 days annual leave. The Company had no work scheduled for Mr Lyons in March 2008 and he would not, therefore, have received pay during that period. Consequently, the Company refused to pay him for the annual leave requested.

Decision

The question that the Employment Appeal Tribunal (EAT) sought to answer was: Is an employer legally obliged to allow a worker to take paid annual leave even if it does not fit with the business requirements?

The EAT found that the right to statutory annual leave is not an absolute right in that it has been made subject to notice provisions which can be varied by contract. An employer must have a mechanism which operates to allow workers to take paid annual leave during the whole of the leave year. That mechanism must not be operated in an unreasonable way which would have the effect of denying workers the entitlement to leave which they have lawfully requested. However, the EAT concluded that, if the mechanism is operated correctly by both the employer and the worker, it could, nonetheless, result in the loss of the right to untaken annual leave at the end of the leave year.

Comment

The EAT’s findings indicate that, where a contract of employment includes notice requirements for taking annual leave, and the employee fails to request annual leave in accordance with that notice provision, the employer is not required to allow the employee to take paid annual leave if it does not fit in with the requirements of the business. This is likely to be most relevant at the end of a leave year when an employee makes a request for annual leave on short notice and the employer is not able to accept the request due to staffing needs.

The decision is a useful reminder that the principles established in Stringer will not apply universally. Only when an employee is deprived of the opportunity to take annual leave will they be allowed to carry over.

Employers should ensure that their contracts of employment require employees to give adequate notice before taking annual leave.