The European Court of Justice (ECJ) has clarified the circumstances in which a worker’s unused annual leave will automatically carry over, and whether a worker would be entitled to a payment in lieu of that annual leave on termination of employment.

The ECJ considered two German employment cases involving the right to a payment of accrued but untaken annual leave under Article 7 of the EU Working Time Directive.

The first case related to an employee who had not taken any annual leave in the final 5 months of his employment and had requested a payment in lieu of his unused annual leave. The request was refused.

The second case involved an employee who was invited to take his remaining leave, but he only used two days and requested payment in lieu of the remainder. This employer also refused.

The ECJ was asked whether the right to a payment in lieu of annual leave may be lost where the employee had failed to apply for the leave they were entitled to. The ECJ held that national law could not allow the automatic loss of accrued but untaken annual leave on termination, nor at the end of the relevant holiday year, merely because the worker did not try to exercise their right to take all their annual leave.

However, the ECJ noted that such accrued but untaken leave could be lost if the employer can demonstrate that it enabled the worker to take their annual leave and provided the employee with sufficient information to that effect. The burden of proof rests with the employer to show that it had done so.

If a worker has not lost their annual leave entitlement, they are entitled to take that holiday, carry it over into subsequent holiday years, or receive a payment in lieu on termination.

The cases will now return to the German national courts to make a final decision following the ECJ opinion. This decision does not mean that employers must force workers to take their holidays. Rather, employers should ensure that their workers have had the opportunity to do so, and give workers up-to-date information, in good time, regarding their remaining leave in the holiday year.

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