ANNUAL LEAVE: TAKE IT OR LOSE IT

By Monique Jefferson Wednesday, August 06, 2014
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This minimum annual leave entitlement is referred to as "statutory annual leave". Employees may also be granted annual leave in addition to their statutory annual leave entitlement. However, this is not regulated by statute and employers may accordingly prescribe the terms and conditions governing such leave. For example, the employer may regulate payment for additional annual leave and permit payment in respect of untaken additional annual leave during employment.

This is not permissible in respect of statutory annual leave. The employer may also determine its own rules regarding the accumulation and forfeiture of additional annual leave and provide, for example, that leave not taken within a prescribed time frame is automatically forfeited. The rules around the accumulation and forfeiture of statutory annual leave are more complicated and, until recently, there has been great uncertainty as to whether untaken statutory annual leave is forfeited. In this regard, the BCEA provides that an employee must be granted annual leave not later than six months after the end of the annual leave cycle in which it accrued. Accordingly, an employee who does not take all her annual leave in the leave cycle in which it accrues is entitled to carry that leave over and use it in the six months immediately following the completion of the annual leave cycle.

But what if the employee does not take her leave by the end of the sixth month? Does she lose it, or does it remain available for her to take at a later stage? The Labour Court held in Jooste v Kohler Packaging Limited (2004) 25 ILJ 121 (LC) that statutory annual leave not taken by the sixth month following the annual leave cycle in which it accrued is forfeited. The case of Jardine v Tongaat-Hulett Sugar Limited (2003) 24 ILJ 1147 (LC) held a different view and found that statutory annual leave not taken is never forfeited and may be carried over to subsequent annual leave cycles.

This obviously has significant implications for employers. For example, an employee who never takes all her leave during employment would be entitled, on termination, to be paid in respect of all untaken leave and this may mean a handsome pay-out because untaken leave must, on termination, be paid at the employee’s rate of pay on termination – not at the rate that applied when the employee originally became entitled to the leave.

On the other hand, this interpretation would suit employees who may have difficulty taking holidays due to work pressure or managers who unreasonably refuse leave. Van Niekerk J in Ludick v Rural Maintenance (Pty) Limited [2014] 2 BLLR 178 (LC) considered these two conflicting decisions when determining whether an employee who had worked for an employer for 27 months and had not taken any annual leave during this period was entitled to be paid upon termination of his employment in respect of all the annual leave that had accrued to him over the two annual leave cycles.

The employer argued that the employee had no entitlement as, in terms of the leave policy and his employment contract, all his annual leave had been forfeited. The employee argued that the amount of annual leave that he was entitled to accumulate was uncapped as the BCEA is silent on forfeiture. He also alleged that the provisions in his employment contract which provided for the forfeiture of annual leave were unenforceable as section 40(b) of the BCEA provides that an employee is entitled to be paid for "any period of annual leave that the employee has not taken" upon termination of employment.

Van Niekerk J considered the purpose of the BCEA and held that if employees were entitled to accumulate leave indefinitely and claim payment on termination of employment it would undermine the purpose of the BCEA which is to ensure that employees take their annual leave and have a break from work.

In the circumstances, Van Niekerk J followed the Jooste decision and held that claims for accrued annual leave pay upon termination are limited to annual leave not taken in the current annual leave cycle and the annual leave cycle immediately prior to the current annual leave cycle. Van Niekerk J recognised that there may be circumstances where employers frustrate employees from taking annual leave but in these circumstances, the employee must use the enforcement mechanisms contained in the BCEA as opposed to never taking leave and claiming payment on termination.
Thus, employees earning below the prescribed earnings threshold (currently R193 805 a year) would need to seek enforcement through the labour inspectorate while those earning in excess of the threshold may ultimately need to seek specific performance through the Labour Court to force the employer to grant them their leave. Practically speaking, however, employees may not feel comfortable seeking enforcement mechanisms against their employer when they still need to maintain a good working relationship with the employer.

Be that as it may, the balance of authority from the Labour Court therefore now suggests that untaken statutory annual leave from the current annual leave cycle and the immediately preceding leave cycle is not forfeited and must be paid out on termination and, in the absence of an employment contract or policy to the contrary, all statutory annual leave from prior annual leave cycles is forfeited.