Employers are making a big mistake if they assume that outstanding holidays will lapse after the statutory expiry date. The Court of Justice of the European Union (EU Court of Justice) recently ruled that there can be no question of automatic expiration: holidays can only expire if the employee has actually been enabled to take them. The employer has the clear task of proving this – if necessary.
The right to paid annual leave is one of the fundamental rights as laid down in the EU Charter and this right is further elaborated in the Working Time Directive (Directive 2003/88/EC). The case law of the EU Court of Justice also shows that this right to holidays is considered an extremely important principle of EU law. In two rulings of 6 November 2018 (ECLI:EU:C:2018/872 and 874), the EU Court of Justice again emphasised the importance of actual holiday rest. In order to promote this so-called recuperation function of holidays, it is not acceptable to provide incentives to give up holiday rest (as already follows from earlier rulings of the EU Court of Justice). The aforementioned rulings now also mean that employers have an obligation to ensure in a specific and demonstrable manner that employees are actually given the opportunity to take outstanding holidays. If necessary, the employer must even encourage the relevant employee to take the outstanding days of leave in good time.
In the Netherlands, an expiry deadline is applicable to the minimum holiday entitlement (the so-called statutory holidays that amount to four times the number of working hours per week): the minimum holiday entitlement expires six months after the calendar year in which it was accrued (Book 7, Article 640a of the Netherlands Civil Code). However, as a result of the rulings discussed here, employers may no longer simply assume that holidays automatically lapse after this period.
In other words, a holiday entitlement can only lapse if it is established that the employee, after having actually had the opportunity to take the holiday, has consciously and in full knowledge of the consequences waived it.
In practical terms, this means that employers must repeatedly inform their employees in writing, well in advance of the expiry date, about the imminent expiry of their holidays and the need to take them in good time. It is important to keep these warnings, reminders and requests to employees in writing and to have the employee formulate a specific holiday schedule. If the employer fails to do this, the employee may argue that his holiday entitlement has not lapsed and, for example, must be paid to him upon termination of his employment. If an employer does not have the above mentioned supporting documents in its record-keeping system, this can then come with a hefty price tag!
I am not ruling out the possibility that this could play a major role in negotiations on the termination of employment relationships by mutual consent (by means of a settlement agreement). That is to say, case law now makes provision for employees to ask their employer to produce the evidence. If there is no evidence, this could result in unpleasant extra costs for the employer. Therefore, this is something to be aware of.