Recent annual leave cases have tended to favour employees. In contrast, the Employment Appeal Tribunal ("EAT") decision in Lyons v Mitie Security Limited has confirmed that an employee’s statutory right to annual leave is not unchallengeable.

Mitie's holiday year ran from 1 April to 31 March. Mr Lyons made a request at the beginning of March 2008 to use his remaining nine days' holiday entitlement for that year. Mitie refused the holiday request on the basis that Mr Lyons had failed to give four weeks' notice as required under his contract of employment. Mitie did not allow employees to carry over holidays to a new holiday year and so Mr Lyons lost his unused holiday.

He resigned and lodged a claim for unpaid holiday pay, amongst other claims. He argued that his statutory entitlement to four weeks' paid annual leave under the Working Time Regulations took precedence over any contractual obligation he may have in relation to notice, and that Mitie should have granted his holiday.

The EAT disagreed. They concluded that Mr Lyons was bound by the contractual notice requirements. Provided an employer does not operate any contractual or statutory conditions in an unreasonable, arbitrary or capricious way so as to deny any lawfully requested holiday entitlement, it can impose conditions that result in an employee losing the right to leave that has not been taken at the end of the holiday year.

Impact on employers

  • Employers can enforce a "use it or lose it" practice in respect of holiday entitlement, where fair and reasonable notice provisions or conditions of entitlement are in operation.
  • Fair and reasonable notice can be a longer period than the minimum required under the Working Time Regulations 1998.
  • A "use it or lose it" approach will not apply to situations when the employee is unable to take their holidays because of ill health, in which case they should be allowed to carry untaken holiday over into a subsequent holiday year.
  • Similarly, it will not apply to situations when the employee is unable to take their holidays because of maternity leave. The European Court of Justice has said that it would amount to sex discrimination if a woman were to lose her entitlement to statutory annual leave as a result of going on maternity leave.