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“Use your annual leave or lose it”

Nicholas Preston

Are employers really allowed to say this?

Recently, the question was asked if an employee has accumulated an excessive amount of annual leave, could the employer force its employees to forfeit the surplus annual leave that wasn't taken? Unfortunately, the answer is not as cut and dried as the question is.

The question is based on s20(4) of the Basic Conditions of Employment Act, No 75 of 1997 (BCEA) which states that:

  • "An employer must grant annual leave not later than six months after the end of the annual leave cycle".

Section 20(1) of the BCEA defines 'annual leave cycle' as:

  • "The period of 12 months' employment with the same employer, immediately following either an employee's commencement of employment or the completion of the employee's prior leave cycle".

On a strict reading of the BCEA, the provision may be interpreted to read that annual leave can only be granted to an employee within the annual leave cycle itself, being 12 months, but not later than six months after this.

What if an employee doesn't take their annual leave within this 18-month period?

Up until recently, we had received conflicting decisions from the labour court:

  • In the decision of Jardine v Tongaat-Hulett (2003) 24 ILJ 1147 (LC), the labour court held that annual leave - which is not taken within six months after the annual leave cycle has been completed – is not automatically forfeited by the employee. In addition, if the employment contract is terminated, the employee is not entitled to be paid for that leave.

Accordingly, it appeared that employees were able to use their accumulated leave entitlement indefinitely and beyond the 18-month period set out in the BCEA.

However, a year later the labour court said something different in the case of Jooste v Kohler Packaging (2004) 25 ILJ 121 (LC):

  • This time, the labour court interpreted the BCEA only to allow a claim for annual leave to be made for the leave cycle immediately preceding the current and uncompleted leave cycle and for the current and uncompleted leave cycle itself.
  • In the Jooste decision, the court held that to allow payment for prior and further leave cycles would allow both the employer and employee to sidestep the provisions of the BCEA.

This conflict was finally resolved in October 2013, again by the Labour Court, in the decision of Ludick v Rural Maintenance (Pty) Ltd (2014) 2 BLLR 178 (LC):

  • The court - in coming to its decision - considered the conflicting decisions that were previously handed down.
  • In addition, it was called upon to determine a clause in Ludick's contract, which provided that any annual leave not taken within 30 days of the employer's financial year-end would lapse.
  • The court first dealt with the clause – mentioned above - in the contract. To do this, it had to consult s5 of the BCEA:
    - This section provides that the BCEA will not be affected by an agreement between the parties. Accordingly, employers and employees cannot contract out of the provisions of the BCEA.
  • After this, it was found that an employee is entitled to use their accumulated leave for six months after the annual leave cycle, as provided for in s20(4) of the BCEA. This period may not be shortened by any agreement between the parties.

In trying to resolve the two conflicting decisions, the labour court preferred the latter decision of Jooste, more particularly that an employee will only be entitled to the accumulated annual leave which accrues in the previous leave cycle as well as that leave which accrues in the current and uncompleted leave cycle, subject to the 18-month period referred to above.

Accordingly, annual leave not taken with the annual leave cycle or within after the end of this cycle, as envisaged by s20(4) of the BCEA, is forfeited. This only applies to statutory leave granted to employees in terms of the BCEA, more particularly the statutory minimum of 15 annual leave days.

Any leave exceeding the statutory minimum is deemed to be contractual leave and is not regulated by the BCEA. Accordingly, if you grant leave over and above the statutory minimum, it is a good idea to conclude agreements with your employees that deal with the use, forfeiture and/or pay-out of this contractual leave. You should also develop a practice that forces employees to take their annual leave in the annual leave cycle or six months after this.

Author: Nicholas Preston is a senior associate in the employment practice at Cliffe Dekker Hofmeyr.