Summary and implications

Hot on the heels of our latest “Sickness and holiday” briefing, the ECJ has just confirmed that employers can rely on express national measures that limit carry-over of accrued, untaken, holiday. In KHS AG v Schulte, the ECJ upheld as lawful a 15 months carry-over period (found in a collective agreement) on the basis that, after that time, accrued annual leave “ceases to have its positive effect for the worker as a rest period and is merely a period of relaxation and leisure”.

The ECJ emphasised that a carry-over period must enable a worker to have staggered, pre-planned rest periods which are available in the long term. However, the court also recognised that carry-over periods must “protect the employer from the risk that a worker will accumulate periods of absence of too great a length, and from the difficulties for the organisation of work which such periods might entail”. 

Following this decision, you may:

  • Revise collective agreements to include a 15 months carry-over period which will start at the end of the holiday year in which annual leave accrues; 
  • Introduce a similar carry-over period into individual contracts of employment. Although the judgment is concerned with national and collective carry-over measures, it is arguable that individual service agreements, governed by the Working Time Regulations, should be interpreted in the same way;
  • Argue that, even in the absence of express carry-over provisions, accrued holiday falls by the sideline after 15 months. It is hard to say with real certainty that such an argument will succeed as the judgment in Schulte deals with an express carry-over clause and is silent on the issue of carry-over in principle. However, arguably, once accumulated holiday loses its “rest” element, a worker may not “take” the leave nor should be paid in respect of it. However, in the absence of direct judicial authority and statutory provisions on this point, the validity of this argument is still moot and you may need to fall back on the Fraser “use it or lose it” judgment, reviewed in our last briefing.

As the Government is currently considering amendments to the Working Time Regulations, it would make sense if it included a 15-months carry-over period in any revised legislation.