Can an employee accumulate leave on an unlimited basis with the expectation that on termination of employment, he may recover from the employer, without any limitation, the full remuneration for leave accrued but not taken by him during his employment with the employer?
Annual leave is a basic right afforded to employees in terms of the Basic Conditions of Employment Act (BCEA). The BCEA also regulates payment upon termination of the employment relationship and states that, the employer must pay the employee the full remuneration for annual leave accrued but not granted before the date of termination, together with a pro rata amount for leave accrued in the current cycle. Additionally, the BCEA determines that an employer must grant an employee annual leave not later than six months after the end of the annual leave cycle.
In light of these BCEA provisions, the question arises whether an employee can accumulate his leave on an unlimited basis with the expectation that on termination of employment, he may recover from the employer, without any limitation, the full remuneration for leave accrued but not taken by him during his employment with the employer.
This question was recently raised in the case of Ludick v Rural Maintenance (Pty) Ltd (2014) 2 BLLR 178 (LC) where an employee claimed payment in respect of the value of accrued statutory annual leave where the employee had never taken leave during his employment with the employer. The employee relied on the BCEA and argued that a provision included in his employment contract was invalid to the extent that it provided that leave not taken within a prescribed period of time would lapse, as such a clause established a less favourable condition of employment than that envisaged by the BCEA.
In dealing with this clause, the Labour Court held that a provision in a contract which denies an employee a basic statutory condition of employment cannot be valid as the provisions of the BCEA will not be affected by an agreement and accordingly, the employment agreement cannot exclude the provisions of the BCEA.
That said, the Labour Court found that the BCEA does not provide a basis for the unlimited accrual of annual leave. Accordingly, the court stated that claims for accrued leave are limited to annual leave accrued but not taken in the current and the immediately prior leave cycle. What this means is that an employee will only be entitled to claim the value of leave not taken in the previous leave cycle and in the current leave cycle up to the date of termination. This in effect means that leave not taken within the annual leave cycle or the six month period thereafter (as provided by the BCEA) cannot be claimed from the employer. It is also important to note that the entitlement to claim leave also only applies to the minimum 15 working days leave granted to employees in terms of the BCEA.
Employers should accordingly review their leave policies and address the accrual and forfeiture of leave in line with this decision and advise employees to take leave to avoid their accrued leave lapsing.