LABOUR COURT CONFIRMS LEGAL POSITION ON ANNUAL LEAVE ACCUMULATION AND FORFEITURE IN HARTLEY V SMD TRADING GROUP CC (D138/21) [2024] ZALCD 16 (26 JUNE 2024)
The Applicant (Hartley) in the aforementioned case, referred a dispute to the Labour Court (“LC”) in terms of section 77(3) of the Basic Conditions of Employment Act 75 of 1997, as amended (“BCEA”). In accordance with this section, the LC has concurrent jurisdiction with the civil courts to hear and determine any matter concerning a contract of employment. The Applicant contended that the Respondent and his employer (SMD Trading Group CC) acted in breach of contract in that it substantially reduced his salary without his agreement and failed to pay him his accrued leave upon termination of employment, which according to him amounted to seventy-three (73) days.
With regards to the leave pay owed to the Applicant, the Respondent submitted that an email was sent to all managers, including the Applicant approximately two (2) years before his resignation, advising them that no staff member could accumulate more than fifteen (15) annual leave days per annum and that any days in excess of that would automatically be forfeited. For this reason, the Respondent only paid the Applicant fifteen (15) days of accrued leave when his employment came to an end.
The leave amount paid to the Applicant was also calculated at the reduced salary the Applicant received and not based on his salary before the reduction was made. The Respondent also contended that during the Applicant’s tenure as shareholder, he did not accrue any annual leave. As no employment contract was presented in the LC, it was of the view that the terms of the agreement in so far as the Applicant’s salary and leave entitlement are concerned must be proven by the Applicant by way of viva voce evidence. Based on the evidence, the LC found that the Respondent unilaterally and materially reduced the Applicant’s salary, thereby breaching his contract of employment.
Annual Leave
On the issue of annual leave, the LC at the outset confirmed the default position in law, being that in the absence of a contract of employment stipulating the Applicant’s annual leave entitlement, the provisions of the BCEA would determine the Applicant’s entitlement to paid annual leave. The LC pointed out that in terms of section 20 of the BCEA, an employer must grant an employee at least twenty-one (21) consecutive days’ annual leave on full remuneration in respect of an annual leave cycle of twelve (12) months, and that annual leave must not be granted later than six (6) months after the end of the annual cycle. The LC also reiterated that it is not permissible to pay an employee in lieu of taking leave, save only in the case of termination of employment, in which case, an employee must be paid for any annual leave not taken that is due in terms of section 20(2) of the BCEA. The LC did however note that the Applicant’s evidence did not clearly prove that he had an unlimited accumulation of accrued annual leave that was not taken by him. In the opinion of the LC, even if the Applicant could show that he was entitled to twenty (20) days’ paid leave in an annual leave cycle, the Court was not convinced that the Applicant could produce sufficient evidence to establish a dispensation of unlimited accumulation of annual leave and found that such a dispensation would in any event run counter to how annual leave was practically treated by the Respondent.
The LC further confirmed that the continued accrual of annual leave that is not taken in a particular leave cycle would only be permissible where it comes to what is commonly known as non-statutory leave, i.e., leave granted in excess of the BCEA minimum prescribed by section 20 of the BCEA. In the Applicant’s case this would have amounted to an additional five (5) days of annual leave and should the Applicant have been entitled to same, the additional annual leave days could never have accrued to the extent claimed by the Applicant, considering he had only been employed by the Respondent for a total of six (6) years. In addition, when it comes to the BCEA annual leave entitlement of fifteen (15) days, the LC relied on the approach adopted in Jooste v Kohler Packaging Ltd (2004) 25 ILJ 121 (LC) (“Jooste case”), which has consistently been applied in several later judgments including Ludick v Rural Maintenance (Pty) Ltd (2014) 35 ILJ 1322 (LC). In the Jooste case, the Court limited claims for the value of accrued leave to annual leave accrued but not taken in the leave cycle when an employee’s employment terminates and during the immediately preceding leave cycle. It was noted in the Jooste case that the purpose of the BCEA is to ensure that employees take annual leave and that permitting payment for statutory annual leave accumulated from prior cycles upon termination would allow both the employer and the employee to circumvent section 20 of the BCEA. The LC therefore found that any statutory leave not taken by the Applicant before the expiry of six (6) months after each succeeding leave cycle, was forfeited as a matter of law.
Based on the evidence presented to it, the LC was not persuaded by the Applicant’s leave pay calculation and was not convinced that the Applicant produced sufficient evidence to establish a dispensation of unlimited accumulation of leave. The LC additionally stated that the purpose of affording employees guaranteed leave is for employees to have the opportunity of guaranteed rest and recuperation, which in turn would protect their employment and enhance workplace safety and efficiency, which would be placed at risk by a fatigued employee. Further that, employees must know that they must utilise their leave, or else they will lose it. In that way, they will be motivated to enforce their rights, and take their leave, and the objectives of the BCEA will be achieved.
In the absence of the Applicant being able to prove that he was entitled to the leave pay he claimed, the LC reverted to the Respondent’s own leave policy, which was not contested. Accordingly, the LC concluded that the Applicant was entitled to fifteen (15) days’ annual leave pay, at the rate the Applicant was paid before his salary was unilaterally reduced.
Key Take Aways
This case proves the importance of maintaining employees’ annual leave records and ensuring that employment contracts clearly stipulate an employee’s annual leave entitlement. Leave Policies are additional methods of ensuring that employees are familiar with their employer’s leave practices and procedures so as to avoid any contradictory practices in the workplace, particularly where non-BCEA leave is granted. Employers who implement leave forfeiture clauses into their employment contracts must ensure that these clauses do not contradict the provisions of the BCEA insofar as annual leave is concerned and must ensure that leave practices and procedures are consistently and fairly applied with respect to all employees.
Andrea Miguel – Candidate Attorney
JUSTINE DEL MONTE & ASSOCIATES INCORPORATED
