Forfeiture of Annual Leave – Yes/No?

As promised last week, today we tackle a very controversial subject. The previous two weeks we had a look at the first of three articles namely the accrual of annual leave, https://www.misa.org.za/no-work-no-pay-no-accrual-of-leaveor-not/, and your entitlement to annual leave, https://www.misa.org.za/annual-leave-entitlement-knowledge-is-power/.

Let’s look at whether you can forfeit your annual leave if you do not take it.

Forfeiture

There has been much uncertainty on this topic on the forfeiture of annual leave.

• MIBCO Main Collective Agreement

The entitlement of annual leave is dealt with in clause 5 of the MIBCO Main Collective Agreement (the agreement), and has been dealt with in our previous articles. In essence, an employee is generally entitled to either 3 or 4 weeks’ annual leave, depending on the number of years of continuous employment with the same employer. So if the employee has completed 8 or more periods of continuous employment, with the same employer, the employee will be entitled to four weeks’ annual leave.

• Basic Conditions of Employment

In terms of the Basic Conditions of Employment Act, 75 of 1997 (BCEA), annual leave is dealt with in sections 20 and 21, and must be read with section 40.

However, it is interesting to note that both the Agreement and the BCEA is silent on the issue of forfeiture of annual leave.

• Labour Court

Part of the reason for the uncertainty is that there has been differing views in the Labour Court.

In the case of Jardine v Tongaat-Hulett Sugar Ltd (2003) 7 BLLR 717 (LC), the court (per Pillay J) found that “leave not taken within the six months after the end of a leave cycle is not automatically forfeited, nor is any right to payment in respect of that leave forfeited.”

A different view was expressed in the case of Jooste v Kohler Packaging Ltd (2004) 25 ILJ 121 (LC), where the court (per Franklin AJ) held that statutory annual leave not taken by the sixth month, following the annual leave cycle in which it accrued, is forfeited.

Van Niekerk J considered these two conflicting decisions in the case of Ludick v Rural Maintenance (Pty) Ltd (2014) 2  BLLR 178 (LC). The employee did not take any annual leave during the 27 months of employment. On termination, the employee claimed that he was entitled to his accrued leave pay for the entire duration of employment. The Employer claimed that in terms of its leave policy, the employee had forfeited all leave. He was entitled to 15 days leave for each completed year of service. The Employer required the employee to take his leave by no later than 30 March of each year. The employee was therefore paid only for the last 3 months on a pro-rata basis.

In this case, the court found that “section 20 of the BCEA contemplates that claims for the value of accrued leave are limited to statutory annual leave accrued in the current and immediately preceding leave cycles. An employee does not forfeit that leave or any claim to its value if for whatever reason, the leave is not taken in the six month period contemplated by section 20(4). A provision in a contract (such as clause 7.10 when applied in the present instance) would seem to me therefore to deny the plaintiff the benefit of a statutory basic condition of employment, which in terms of section 4 of the Act, must be read down into his employment contract”. (Own Emphasis)

So it appears that the balance of authority from the Labour Court suggests that statutory annual leave, from the current leave cycle and that immediately preceding the leave cycle, is not forfeited and must be paid out to the employee upon termination.

The important thing to note is that this only relates to the statutory leave entitlement. Employees that may receive leave, granted to them in addition to the statutory leave entitlement, may find that the employer may prescribe the terms and conditions governing such leave.

Purpose of Annual Leave

Employees therefore cannot accrue annual leave into eternity, as this would undermine the BCEA. The purpose of the legislation is to ensure that employees take their annual leave and have a break from work. Upon termination, an employee will only be entitled to be paid for the current and immediately preceding leave cycles. Forfeiture policies also cannot be less favourable than what is prescribed by legislation.

Employees must be mindful that annual leave has to be applied for and approved by the employer in advance. Be aware of your company leave policy and any forfeiture policy that may be applicable. There is recourse should an employer unreasonably refuse to grant an employee annual leave. So don’t find yourself in a position where you do not take your annual leave and expect to be paid on termination, as those days accumulated beyond the current and immediately preceding leave cycles, will be forfeited.

Conclusion

You are encouraged to familiarize yourselves with the company annual leave policy and any forfeiture policy that may be applicable. Make sure that you plan your leave accordingly and enjoy a well-deserved break, when needed.

Fact remains, you cannot accrue leave days indefinitely and a portion thereof may be subject to forfeiture upon termination of employment, especially when there is a forfeiture policy in place. When in doubt, contact MISA.

MISA – Just a phone call or an e-mail away!

Kindly utilise the following e-mail addresses and links for assistance during this time:

Employer UIF/TERS Submissions                  UIFClaim@ms.org.za

Legal/Labour-related enquiries                      Legal@ms.org.za  

Legal Reception                                                011 476 3920

MISA Benefit claim-related enquiries            Claims@misa.org.za   

Any other enquiries                                          Info@ms.org.za  

Website                                                              www.misa.org.za    

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