Until recently, there has been great uncertainty regarding forfeiture of accumulated leave, and employers and employees have often asked questions in this regard. This has led to countless disputes referred to the CCMA.

The Basic Conditions of Employment Act 75 of 1997 (BCEA), refers to “statutory annual leave” and provisions for one (1) day of annual leave on full remuneration for every seventeen (17) days on which the employee worked or was entitled to be paid. An employer may also, in some circumstances, provide for additional annual leave in its relevant policies. Any additional annual leave is not regulated by legislation, and the employer can dictate payment and forfeiture thereof. This, however, is not the case with statutory annual leave.

The BCEA establishes that an employer is obliged to grant an employee annual leave within six (6) months after the annual leave cycle in which it accrued has ended. Therefore, an employee is entitled to carry over any leave not taken in the leave cycle in which it accrued and use those leave days within the six (6) months directly following the completion of the relevant annual leave cycle.

The question that needs answering is this: What happens if the employee does not use the leave due to them within the six (6) months as described above? In the matter of Jooste vs Kohler Packaging Limited (2004) 25 ILJ 121 (LC), the Labour Court indicated that statutory annual leave not taken within six months immediately following the annual leave cycle in which it accumulated is indeed forfeited. A contradictory view was then held in the matter of Jardine v Tongaat-Hulett Sugar Limited (2003) 24 ILJ 1147 (LC). It found that an employee’s annual leave, which is not used, will never be forfeited and can be carried over to the following annual leave cycles.

The latter judgement mentioned above directly affects employers. It would have been a cause for great concern as an employee who has never taken leave throughout his/her tenure will have to be compensated upon termination, not at the initial rate of pay when they were employed, but at the rate they were earning when terminated.

In the matter of Ludick vs Rural Maintenance (Pty) Limited [2014] 2 BLLR 178 (LC), the learned judge Van Niekerk was faced with these two contradictory judgements when he had to establish whether an employee, employed for twenty-seven (27) months and had never taken any of his annual leave during this period, was entitled to be remunerated upon the termination of his employment in respect of all the annual leave that was due to him over the two previous annual leave cycles.

The employer’s argument was simply that the employee had no claim as there had been forfeiture in terms of their relevant leave policy and the employee’s contract of employment. The employee argued that the BCEA did not address the issue of forfeiture and that there was no indication of a limit on leave days accrued.  The employee further argued that certain clauses in his contract of employment were in contrast with section 40(b) of the BCEA, as it quite clearly states that an employer is obliged to pay an employee for “any period of annual leave that the employee has not taken” upon the termination of employment.

In his judgement, the judge indicated that the original purpose of the BCEA should be considered and that the purpose of the BCEA would be diminished should employees be allowed to accumulate leave without end and claim for payment thereof upon the termination of their employment. The judge held that the BCEA’s purpose for leave is to ensure rest and relaxation for employees, not to build up savings.

Van Niekerk J aligned himself with the Jooste judgement and accordingly found that the employer was not liable for payment of the leave not taken in the Applicant’s first leave cycle (the first twelve months [12] of employment).  In relation to the second leave cycle, the court held that annual leave must be taken six (6) months after the conclusion of a particular leave cycle. The court further held that statutory annual leave not taken within the six (6) months immediately following the previous leave cycle will be forfeited.

Therefore, employers should ensure that all employees are educated in terms of their statutory annual leave rights and responsibilities to eliminate any confusion at the time of termination of employment.

Article by: Martin Snyman
Dispute Resolution Official – Pretoria