I had several employers approaching me last year in respect of annual leave, leave policies and compulsory shutdown operational and administrative requirements due to the festive season. However, the biggest question was in respect of leave accrued and can it be forfeited. Just before the festive season started we received a hand down from the Labour Court, the Labour court judgment in WJ Ludick vs Rural Maintenance (Pty) Ltd case nr: Js 633/07 delivered on the 30th of October 2013, clarifies the subject regarding leave due in terms of the Basic conditions of employment act. The facts in this case and the question of law the court was asked to answer is as follows:
The employee left the employ of the employer and wanted to claim all leave not taken in the preceding two leave cycles prior to the present cycle, which had been paid by the employer already. As such the first leave cycle was two years prior to termination and the second leave cycle the one immediately preceding the cycle which the employee was in when the termination took place, and which was paid out by the employer.
The employers contract required the all it’s employee’s to take any leave due prior to the start of the next financial year or they would forfeit such leave. The employer therefore argued that the employee had lost the leave due to him for the cycles claimed. The court was tasked with interpreting the relevant legislation and very simply find whether the employee forfeited the leave for these cycles.
The relevant legislation Section 20 of the BCEA reads as follows:
“Annual leave. –
1) In this Chapter, “annual leave cycle” means the period of 12 months’ employment with the same employer immediately following-
(a) an employee’s commencement of employment; or
(b) the completion of that employee’s prior leave cycle.
(2) An employer must grant an employee at least—
(a) 21 consecutive days’ annual leave on full remuneration in respect of each annual leave cycle; or
(b) by agreement, one day of annual leave on full remuneration for every 17 days on which the employee worked or was entitled to be paid;
(c) by agreement, one hour of annual leave on full remuneration for every 17 hours on which the employee worked or was entitled to be paid;
(3) An employee is entitled to take leave accumulated in an annual leave cycle in terms of subsection (2) on consecutive days.
(4) An employer must grant annual leave not later than six months after the end of the annual leave cycle.….
(10) Annual leave must be taken—
(a) in accordance with an agreement between the employer and employee; or
(b) if there is no agreement in terms of paragraph (a), at a time determined by the employer in accordance with this section.
Section 40 of the BCEA regulates payments on termination of employment. Paragraphs (b) and(c) are relevant for present purposes. They read as follows:
‘40. On termination of employment, an employer must pay an employee-
(b) remuneration calculated in accordance with section 21 (1) for any period of annual leave due in terms of section 20(2) that the employee has not taken; and
(c) if the employee has been in employment longer than four months in respect of the employee’s annual leave entitlement during an incomplete annual leave cycle as defined in section 20(1) –
(i) one day’s remuneration in respect of every 17 days on which the employee worked or was entitled to be paid; or
(ii) remuneration calculated on any basis that is at least as favorable to the employee as that calculated in terms of subparagraph (i).’
The effect of the above is that on termination of employment an employer is obliged to pay to an employee all accrued leave, which has not been granted. The aim of the act is that employees should take their leave and as such the court commented that such a situation should not have arisen but as it did the court dealt with the facts at hand. In interpreting the above legislation the court referred to two previous cases in point:
In Jardine v Tongaat-Hulett Sugar Ltd [2003] 7 BLLR 717 (LC), this court held that s 20(4) of the BCEA, by requiring an employer to grant annual leave within six months after the end of a leave cycle, sought to protect employees who might otherwise be denied leave. At paragraph [14] of the judgment, the court (per Pillay J) stated:
‘It imposes an obligation on the employer, enforceable at the instance of the employee. It does not impose an obligation on the employee to take leave within six months after the end of the annual leave cycle. Leave not taken within six months is not automatically forfeited.’ On this basis, Pillay J held that s 20 (4) imposes an obligation on the employer, enforceable at the instance of the employee, to take leave within six months after the completion of an annual leave cycle. 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 (at paragraph [14] of the judgment. However, the court went on to say at paragraph [16]: ‘Nothing in section 20, however, prevents an employer from requiring an employee to take annual leave in terms of section 20 (4).
In general the act envisages that the parties should determine the time when leave is taken by agreement, but in the absence of such agreement the employer determines when accrued leave should be taken. It is because of this fact that the act sought to protect the employee from cases where the employer continuously denies the employee leave. The second case which the court considered was that of Jooste v Kohler Packaging Ltd (2004) 25 ILJ 121 (LC), where Franklin AJ held that the pro-rated payment in respect of a current leave cycle aside, s 40 of the BCEA contemplates payment only in respect of leave immediately preceding that during which the termination takes place. He did so on the basis that an employer may not refuse an employee leave, and that the Act contemplates that leave will be taken. To permit payment in respect of prior leave cycles would be to permit both the employer and employee to circumvent the Act (see paragraph 3.4 of the judgment). This view reflects that of Wallis Labour and Employment Law who says the following:
‘S12 (4)(a). It is submitted that the reference to ‘leave accrued’ in this section is a reference only to leave which has accrued and which would but for the termination of the contract have been taken during a period of 6 months (s 12(2)(a)) from the end of the previous leave cycle. It would be incongruous to interpret s 12 (4)(a) as applying to leave which was not taken as required by the Act and to which the prohibition contained in s 12 (9) of the Act applied. In effect it would enable both employer and employee to circumvent the provisions of the Act.”
Here the court found as follows:
“Here, I see no good reason why the court should not follow the decision in Jooste, where this court limited claims for the value of accrued leave to annual leave accrued but not taken in the current and the immediately prior leave cycle. Mr Wilkie’s argument in support of an unlimited right to claim the value of accrued leave is premised on the proposition that because the Act does not permit the forfeiture of annual leave, leave accrued cannot be forfeited. But that is not the structure of the Act. The Act establishes a clear floor of rights (or basic conditions of employment) which are positively expressed and which are incorporated by law into every contract of employment. As Franklin AJ observed, one of the very purposes of the BCEA is that employees take annual leave, and to permit payment on termination of employment from prior cycles would undermine the purpose of s 20. If the plaintiff is aggrieved at the defendant’s conduct in frustrating that purpose, he is entitled to invoke the enforcement provisions of the Act.”
“In so far as the plaintiff’s claim in respect of cycle 1 relies on the wording of s 40 (b), the word ‘any’ in that section is qualified by the phrase ‘….. period of any annual leave due in terms of s 20(2)…’. Section 20(2) stipulates only the number of consecutive days’ annual leave that an employer must grant in respect of each annual leave cycle. It does not regulate the timing of that leave, even less does it contemplate that an employee might accrue leave but never take it, only to cash in its value on termination of employment.”
The principle, which the court establishes is therefore clear that an employee forfeits accrued leave which has not been taken which does not fall within the current leave cycles or the one immediately preceding the current cycle. Can Employer in the employment contract set an agreed forfeiture time for the cycle immediately preceding the current cycle? The court held: “The Act imposes an obligation on an employer to grant leave before the expiry of the six-month period. There is no right on the part of the employee to take leave at any time in that period. Section 20 (10) is a clear indication that the BCEA envisages that the timing of leave, once accrued, ought ideally to be the subject of agreement between the parties. In the absence of agreement, the employer may determine the time at which leave should be taken (s 20 (10) (b)). There cannot, therefore, be any objection in principle to a provision in an employment contract that entitles the employer, ultimately, to dictate the timing of annual leave. But the timing of leave is one thing; the forfeiture of leave is quite another. The Act does not contemplate that an employee who does not take leave accrued in an immediately preceding leave cycle at an agreed or determined time during the six-month period following that cycle is necessarily denied that leave, or on termination of employment, its value.”
In short: 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 s 20 (4).
The court went further and stated that:
“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 s 4 of the Act, must be read down into his employment contract.” The conclusion is that any provision in an employment contract which limits the accrual of leave to a period shorter that the current and immediately preceding cycles is less favourable that the act and therefore fall foul of it and the courts will determine that the leave for those two cycles are due to the employee. The best way to avoid this situation is for employers to determine that employees should take their leave at an opportune time and not allow a situation where leave accrues beyond the current cycle. The flip side is that employees should use the mechanisms contained in the act to enforce their right to leave if their employer refuses to grant such or face the possibility that they may loose such leave if it is left to long.