Forfeiture of Accumulated Annual leave

What happens to accrued annual leave that employees do not take before the annual leave cycle ends? Does the employee forfeit those leave days not taken in this period, or does it carry on throughout the employee’s employment?

Employers and employees are both equally confused when it comes to annual leave that has accrued at the end of the period and what happens to it if the employee does not take it within the stipulated time. The Basic Conditions of Employment Act,75 of 1995 (“BCEA”) is also not clear on what happens in this regard.

Leave in terms of the BCEA:

Section 20(4) of the BCEA states that an employer must grant annual leave not later than 6 months after the end of the annual leave cycle, which is defined as a 12-month period. Totalling this period to 18 months.

This section is quite vague on what happens after the 18 months above have lapsed. The Act itself does not indicate if the annual leave days are forfeited or not. Like any other grey area in the law, we have to turn to case law for guidance to determine the way forward.

Case law guidance over the years:

In Jardine v Tongaat Hulett, the Labour Court held that annual leave which is not taken within 6 months after the annual leave cycle has lapsed is not automatically forfeited by the employee. What this meant is that an employee can accrue leave throughout their employment with their employer and it will never fall away. It will always be added to the new annual leave cycle and the employee is entitled to be paid out of the accrued leave days when the employment is terminated, regardless of the number of leave days. Once the employment is terminated, the employee would be entitled to a payout for all those leave days not taken.

A year later, the Labour Court released a conflicting judgment in Jooste v Kohler Packaging. The court stated that the employee can only claim for annual leave in respect of the annual leave cycle immediately preceding the current annual leave cycle, as well as the leave in the current leave cycle itself. As a result of this decision, the court left the ball in the employer’s court to decide whether to allow for the forfeiture or prohibit the forfeiture of annual leave. The reasoning behind this decision is that the whole purpose of the BCEA is to encourage employees to take their leave and not save it in hopes of getting a massive payout at the end of their employment.

In Ludick v Rural Maintenance (Pty) Ltd, the Labour Court considered the two conflicting decisions above and resolved the issue once and for all. The court preferred the decision from Jooste that an employee will only be entitled to accrue annual leave days in the previous cycle, as well as the annual leave that accrues in the current leave cycle, subject to the additional 6 months allocated in the BCEA.

The current stance:

As a result of the Ludick case, it is now commonplace for accrued annual leave to automatically forfeit after the 18-month period has lapsed. It will not carry over into the current leave cycle or any future leave cycles. Nor will the employee be entitled to be paid in lieu of the accrued leave over the years.

Conclusions:

Annual leave does not accrue past 18 months, as mentioned above. As an employer, you should make it part of your company’s leave policy that annual leave not taken within 6 months after the annual leave cycle has lapsed will be forfeited. Build terms around utilisation, forfeiture and pay-out of leave into your employment agreements to avoid confusion amongst your employees as well. If you need assistance with either, contact us today!

– Rushni Ebrahim

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