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The question of whether or not an employee is to be paid for outstanding leave not taken when he resigns or when the employment is terminated for some other reason, is still debatable. The Basic Conditions of Employment Act in section 40 (b) states that ” on termination of employment, the employer must pay an employee 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.”
“ Any period of annual leave” would seem to imply that payment must be made to the employee for all leave that he has not yet taken - irrespective of when it was accrued - last year, a year before etc.
This interpretation is reinforced by section 21(1).
Section 21(1) states that the remuneration for the annual leave must be paid at the rate of remuneration earned at the time the leave was accrued - not in as many words, but that is what it means. Therefore, if an employee still had leave due to him that was accrued 3 years ago, the rate at which that leave is to be calculated would be the rate of remuneration earned by the employee at the time the leave was accrued.
In Jooste v Kohler Packaging Ltd [2003] 12 BLLR 1251 (LC), a somewhat different viewpoint emerged. In this matter, the employee had accrued 141 days leave at the time of his resignation. The employer paid him for only 50 days - in terms of its annual leave policy, employees were only permitted to accumulate 50 days leave.
The Court noted section 40(b) - and said that the question to be addressed was whether the BCEA obliges an employer to pay an employee remuneration in lieu of leave accrued during the years preceding the leave cycle immediately preceding the termination of employment.
The view of the court was that the provision in the BCEA relating to payment for accrued leave on termination, was not intended to address a situation in which the employer had failed to grant leave during previous leave cycles. The court also noted that in terms of the BCEA, employers are obliged to grant the stipulated minimum leave during each leave cycle.
The court also stated that the fact that the employer would be unjustly enriched if it were not compelled to pay the employee for all accrued leave, was immaterial - stating further that the employee should have insisted on his rights during the previous leave cycles.
The applicant's attorney argued that the BCEA does not make any provision anywhere for forfeiture of annual leave, and therefore maintained that the applicant was entitled to be paid for all outstanding leave. In the view of Acting Judge Franklin, the Act contemplates payment only in respect of leave accrued in the cycle immediately preceding that during which termination takes place.
The judge stated that the very purpose of the BCEA is to ensure that any employee takes annual leave, and that an employer may not refuse him that entitlement. The BCEA contemplates that leave will be taken so that the problem of accumulation does not arise.
To permit payment upon termination for statutory leave accumulated from prior cycles would allow both the employer and the employee to circumvent the act, and section 20(2) would then be superfluous. Reference was made to the matter of Newton v Wiloburg Ellis Co (Pty) Ltd in September 1996, where Judge J Kuhn noted that “ the purpose of the act is to regulate the conditions of employment of certain employees.
Amongst others, it makes provision for annual leave in a leave cycle of 12 consecutive months service. The employer is obliged to grant leave to the employee after each leave cycle of 12 months. He is not entitled to pay him his salary or any other amount in lieu of leave. “
In the opinion of Kuhn J, “an employee whose employment is terminated is only entitled to remuneration for the leave that has accrued to him in the leave cycle immediately prior to the termination of his service, and a pro-rata payment for the period for which he was employed in the leave cycle in which his services are terminated.”
Various other argument took place, but the final outcome was that it was the obligation of the employee to ensure that he took his annual leave, and that if this was not possible for operational requirements of the business, he should have obtained a written undertaking from the employer regarding the future disposal of the annual leave owing – i.e. an undertaking from the employer to either permit him to take annual leave at a specific time. Or a written undertaking to pay him out.
The applicant's claim for payment of the excess 91 days was dismissed. In this particular case, the applicant lost just over R70,000 rand. The lesson behind all this is that employers must introduce an Annual Leave Usage Policy - and particularly those employers who allow the accumulation of annual leave.
There is an obligation on the employer to carefully monitor the annual leave usage by employees - and to ensure that employees take their leave in accordance with the policy. If an employer is not prepared to spend a little time and effort in managing and enforcing his own policies, then he may just as well throw those policies out the window - they are not worth the paper they are written on.
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