Labour Court clarifies issue of annual leave

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The issue is premised on Section 20(4) of the Basic Conditions of Employment Act, No 75 of 1997 (BCEA) which states that 'an employer must grant annual leave not later than six months after the end of the annual leave cycle'.

Furthermore, Section 20(1) of the BCEA defines annual leave cycle to mean 'the period of 12 months employment with the same employer, immediately following either an employee's commencement of employment or the completion of the employee's prior leave cycle'.

On a strict reading of the BCEA, the provision may be interpreted to read that annual leave can only be granted to an employee within the annual leave cycle itself, being 12 months, but not later than six months thereafter.

Conflicting decisions

So what happens if an employee does not take their annual leave within this 18 month period? Up until recently we had received conflicting decisions from the Labour Court.

In the decision of Jardine v Tongaat-Hulett (2003) 24 ILJ 1147 (LC), the Labour Court held that annual leave which is not taken within six months, after completion of the annual leave cycle, is not automatically forfeited by the employee nor is any right of payment in respect of that leave, upon termination of the employee's employment.

Accordingly, it appeared that employees were able to utilise their accumulated leave entitlement indefinitely and beyond the 18 month period contemplated by the BCEA.

However, a year later the Labour Court said something different in the case of Jooste v Kohler Packaging (2004) 25 ILJ 121 (LC). This time the Labour Court interpreted the BCEA to only entitle a claim for annual leave in respect of the leave cycle immediately preceding the current and uncompleted leave cycle, as well as for the current and uncompleted leave cycle itself.

Circumvention of provisions

The court in the Jooste decision held that to permit payment in respect of prior and further leave cycles would allow both the employer and employee to circumvent the provisions of the BCEA. As a consequence, employers were faced with one decision providing for the forfeiture of annual leave if the annual leave accrued beyond the 18 month period contemplated by Section 20(4) of the BCEA, and another decision prohibiting such forfeiture.

This conflict was finally resolved in October 2013, albeit again by the Labour Court, in the decision of Ludick v Rural Maintenance (Pty) Ltd (2014) 2 BLLR 178 (LC). The court considered the conflicting decisions previously handed down and in addition to these, was called upon to determine a clause in Ludick's contract, which provided that any annual leave not taken within 30 days of the employers financial year end would lapse.

The court first dealt with the aforementioned clause and in doing so had regard to Section 5 of the BCEA. This section provides that the BCEA will not be affected by an agreement between the parties and accordingly employers and employees cannot contract out of the provisions of the BCEA.

Therefore it was found that an employee is entitled to utilise their accumulated leave for a period of six months after the annual leave cycle, as provided for in Section 20(4) of the BCEA and that this period may not be shortened by any agreement between the parties.

Forfeiture of leave

In turning to resolve the two conflicting decisions, the Labour Court preferred the latter decision of Jooste, more particularly that an employee will only be entitled to the accumulated annual leave which accrues in the previous leave cycle as well as that leave which accrues in the current and uncompleted leave cycle, subject to the 18 month period referred to above.

Accordingly, annual leave not taken with the annual leave cycle or within six months thereafter, as envisaged by Section 20(4) of the BCEA, shall be forfeited. It is noteworthy to mention that this only applies to statutory leave granted to employees in terms of the BCEA, more particularly the statutory minimum of 15 annual leave days.

Any leave in excess of the statutory minimum is deemed to be contractual leave and is not regulated by the BCEA. Accordingly, employers who grant leave over and above the statutory minimum will be well advised to conclude agreements dealing with the utilisation, forfeiture and/or pay-out of such contractual leave, in order to avoid contractual claims being instituted.

Employers should also develop a practice wherein employees are forced to take the annual leave entitlement in the annual leave cycle and at least within the six month period thereafter.