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Unlimited holidays, unlimited headaches? The legal consequences of a laissez faire attitude to annual leave

This week Sir Richard Branson announced, via his website, that he is offering his personal staff as much holiday as they want.  This appears to mean that he is doing away with the Virgin Group parent company’s vacation policy and allowing employees to take as much time off as they need without prior approval.  Their managers will also not be expected to keep track of annual leave.

 Branson declares that he was inspired by the publicity generated by Netflix, who decided to take the same open approach to annual leave, which I commented on earlier in the year.
Already commentators are lining up to point out that Branson’s position on holidays may lead to staff taking less, not more, annual leave.  So what are the legal risks that Branson is taking by loosening the rules on annual leave?  There appear to me to be four main risks: (1) the employer breaching its obligation to provide sufficient information on holiday entitlement; (2) employees not using their statutory entitlement to annual leave; (3) the employer failing to comply with an arguable positive duty to monitor staff working time; and (4) the difficulties that could arise in dealing with chronic absenteeism. 

1.     Your right to know your rights
The Employment Rights Act 1996 (“ERA”) states that employers must provide employees with a statement of particulars within two months of commencement of employment and this must include information on the employee’s entitlement to holidays sufficient to enable the employee’s entitlement to be precisely calculated. 
With no formal mechanism for calculating entitlement, an employee could bring a claim for up to four weeks’ pay for failure to comply with the duty to provide sufficient information. 


2.     Statutory minimum holiday entitlement
Workers in the UK are entitled to 5.6 weeks of paid annual leave per year under the Working Time Regulations 1998 (“WTR”).  It is not possible to contract out of the right to paid holiday altogether or to reduce the entitlement except through a settlement agreement or an agreement entered into following conciliation by an ACAS officer.   
What happens if some employees don’t take their entitlement?  If an employer does not allow a worker to take their statutory leave, the worker can bring a claim against the employer under the WTR for just and equal compensation.  Employees can also bring a claim under the ERA for unlawful deduction of wages.  Under the ERA provisions, the employee may be able to recover unpaid holiday pay in respect of previous years as well as the year in question.
Managers could therefore be left in a very difficult position if an employee is needed in the office but that employee has not used their statutory minimum annual leave entitlement.  Further, employers may have difficulty if their workplace culture does not match the same laissez faire attitude to holidays promulgated by leaders such as Branson. 
If an employee is dismissed because of asserting their rights under the WTR, the dismissal will be automatically unfair, which means employees with less than two years’ service can bring a claim. 


3.     Health and safety – a positive duty to encourage leave?

Under UK statute, there is currently no positive duty on employers to encourage employees to take annual leave and it appears that many UK workers are not making use of their annual entitlement (a third of UK office workers according to this survey).  

However, in certain industries there are regulatory requirements for ensuring employees take annual leave.  Furthermore, the European Court of Justice has ruled that the UK government was wrong when a Department for Trade and Industry guidance document told employers that there was no positive duty to ensure workers took the daily and weekly rest periods required under the WTR (the same legislation from which the statutory minimum holiday entitlement derives).  Although it is not clear that holiday entitlement under the WTR is analogous to rest periods, the point is certainly arguable. 
Furthermore, an employer which does not specify entitlement to annual leave and does not take active steps to ensure that workers use their entitlement may be open to personal injury claims.  In these circumstances, if a worker has taken very little annual leave and then goes off sick citing stress or some other work-related injury, a judge may not be particularly sympathetic if that employer offers no explicit entitlement to annual leave to its workers.

4.     How do you solve a problem like poor attendance?
One of the main reasons why employers use detailed leave policies is to make it clear to employees what is and is not expected of them.  I imagine that every workplace at some point has to deal with issues of absenteeism, which can often be a reason for dismissing an employee if the poor attendance is not improved.  Without clear guidance for employees of what is expected of them, it could prove much more difficult to justify a dismissal where poor attendance is a key factor, which could leave the employer exposed to unfair dismissal claims. 

A practical solution
As a lawyer, I suppose I am prone to seeing the risks associated with any particular action.  The Virgin/Netflix approach is certainly an interesting one but it is worth bearing in mind that Netflix’s policy (or lack thereof) was formulated in California – a jurisdiction with no statutory minimum annual leave entitlement.  Perhaps a safer route would be to make it clear to employees that they are expected to use their statutory entitlement but then leave any additional holidays to their discretion.  It may also be worth providing a carefully drafted statement of principles in relation to leave so employees have an idea of what is expected of them.  

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