Can an employer force an employee to use up annual leave?

Question Details: My employer's HR department has created a new policy setting out that the balance of annual leave owing to employees must be 0 at the end of each year. Are they able to do this?

Filed under Employment Law | 11689 View(s)

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Community Law Wellington & Hutt Valley

Yes, under the Holidays Act an employer can require an employee to take annual leave at a particular time. But the employer can only do this if the employer and employee have tried but have not been able to agree on when the employee will take leave.

So the employer can in theory require the employee to use up all their holidays or annual leave, at a time that suits the employer. For example, an employer can make all employees take leave at Christmas and New Year or when the business is closed for maintenance or some other reason.

But it is much less clear that your employer can have a set policy that every employee's leave MUST be 0 at the end of each year. The Holidays Act rules do permit the employer to achieve this, by requiring each employee taking enough leave to bring their leave to 0, at a particular time. But if they have an infexible policy like this, you could probably argue that your employer had not really tried to agree your leave with you, which they are required to do, or even that the employer was not acting in good faith.

Your employer could respond to those arguments, for instance by saying that it is still willing to agree on leave dates for employees wherever possible - it just wants to make sure leave gets used in the year it comes up. Whether your employer can enforce its new policy will depend on all the facts, including how the employer and employees have behaved in individual cases.

You should be aware that the Holidays Act was changed in 2011, to make it clearer that employers can decide on leave timing, if they and an employee cannot agree. So, while an employer might be criticised if they bring in an inflexible policy, the employer does still have the right to make an employee take leave.

In your circumstances, and seeing this is a new policy, you could ask the HR department to explain the reasons for the policy. If, as is quite common, it is to prevent employees building up very large leave balances that are hard for the employer to manage, you could ask whether exceptions are allowed, for instance if someone wants to save up leave for a trip or a special occasion or event. You could also ask who can approve an exception. All this information may not only help you get some flexibility back, it could also be useful if you ever want to argue that your employer is being inflexible, not trying to agree your leave with you, or not acting in good faith.

You should also check your employment agreement, to see if it has any rules about taking or building up leave. You and the employer must comply with anything in the agreement, and the agreement can only be changed if both sides agree. So, if the new policy is inconsistent with anything in the agreement, the employer must follow the agreement not the "policy".

Answered 23 Jan 2013. The IMPORTANT NOTICE below is part of this answer.

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