Beijing Ton Ren Tang (UK) Ltd v Wang UKEAT/0024/09

In this case the EAT upheld the Tribunal’s decision that an employee had the right under her oral employment contract to pay in lieu of untaken holiday entitlement to the whole period of employment not only her final year. She accrued 30 days’ per year under and had taken hardly any of her holiday during her 7.5 years’ employment. On termination the Tribunal held that she was entitled to 131 days’ pay in lieu. The employer argued that under the Working Time Regulations holiday may not be carried over from one year to the next and that only untaken holiday accrued in the final year could be paid in lieu.

The EAT disagreed as her claim was one under contract. Since the contract gave her greater rights than the Working Time Regulations it was enforceable. This case concerned the interpretation of a specific oral agreement and sets no general precedent for pay in lieu of holiday and termination. However, the case suggests the “use it or lose it” principle under the Working Time Regulations may be disapplied in a contract of employment claim.

Key point: Employers and their advisers should take care with the way in which employment contracts deal with accrued holiday on termination. Where there is an express right to pay in lieu of untaken holiday on termination, employers may wish to explicitly limit this to holiday for the year in which the termination takes place.