Holiday pay rules clarified – employees must ‘use it or lose it’

A judgment handed out yesterday by the EAT provides what one lawyer has called “much needed clarification” for employers on holiday entitlement and whether workers are entitled to holiday pay even when they haven't complied with an employer's rules for taking holidays.

The case, Lyons v. Mitie, involved a claim for holiday pay from an employee whose request to take annual leave did not comply with notice requirements set out in his employment contract. The claimant’s employment contract stated that all applications for holiday must be made on a holiday request form and that the form “wherever possible should be submitted at least four weeks prior to the commencement of the holiday”. It went on to state that “applications for holidays at shorter notice will be considered on their merits and subject to staffing requirements”. Shortly before the holiday year-end, the claimant asked to take his outstanding holiday entitlement, although he did not comply with the four-week notice requirement. The holiday request was refused. The employee argued that the notice requirements set out in the contract effectively prevented him taking his full entitlement before the year end, and resigned.

Owen Warnock, Partner at law firm, Eversheds, commented:

"The law regarding whether or not workers are entitled to holiday under the Working Time Regulations, even when they haven't complied with an employer's notice rules, has been unclear. This decision brings some welcome clarity to the issue and confirms that a worker must give the notice required by his contract in order to benefit from the rights under the Regulations. The Appeal Tribunal cautioned employers that they must not apply their rules in such a way as to effectively defeat a worker's entitlement to annual leave in any given year. In addition, if an employee is forced into applying for holiday late in the year because of sickness, European law may well require the employer to permit him or her to take the leave. However, for the majority of employees the moral of this tale is 'use it – and comply with your employer's holiday rules – or lose it'."