Can an employer simply cancel unused annual leave after the statutory deadline has expired? In two rulings, the Supreme Court of the Republic of Slovenia has taken the position that a mere notification of the allocation of leave is not sufficient. The employer must take an active role and encourage the employee in a timely manner to take their annual leave, while also warning them of the consequences of not taking it.

General information on annual leave

The right to annual leave is a fundamental social right of every employee, which is acquired upon entering into an employment relationship. Annual leave must not be shorter than 4 working weeks. The minimum number of annual leave days depends on the employee’s weekly work schedule and Industry-specific collective bargaining agreements.

Notice regarding the allocation of annual leave

In accordance with Article 160 of the Employment Relationships Act (ZDR-1), the employer must notify the employee in writing of the allocation of annual leave for that year by 31 March of the current calendar year at the latest. 

However, simply notifying the employee of the number of days of annual leave to which they are entitled does not mean that the employer has fulfilled all their obligations regarding the taking of that leave. The employer must monitor the balance of unused annual leave and enable the employee to take it in a timely manner.

Deadlines for taking annual leave

Under Article 162 of the Employment Relationships Act (ZDR-1), an employee must take at least two weeks’ annual leave by the end of the current calendar year; the remainder may be taken by 30 June of the following year, subject to agreement with the employer.

Exceptions are cases where leave is not taken due to illness, injury, maternity leave or leave for the care and protection of a child, for which the deadline for taking the leave is 31 December of the following year.

Employer’s obligation

In its judgment VIII Ips 42/2019, dated 14 January 2020, the Supreme Court of the Republic of Slovenia, taking into account the case law of the Court of Justice of the European Union, emphasized that the employer must ensure, in a concrete and transparent manner, that the employee has a real opportunity to take paid annual leave.

The employer must notify the employee in a timely manner of the number of unused days, encourage the employee, formally, if necessary, to take the leave;

  • organize work in such a way that taking the leave is possible; and
  • clearly and in a timely manner warn the employee that unused vacation days will be forfeited upon the expiration of the permitted period.

It is not sufficient for the employer merely to have not prohibited the employee from taking vacation or to claim that the employee did not submit a request. The burden of proof that the employer acted appropriately and enabled the employee to take vacation rests with the employer.

When can unused vacation time expire?

Vacation may expire after the statutory period has elapsed if the employer proves that it:

  • actually, allowed the employee to take the leave;
  • prompted the employee in a timely manner to take the leave;
  • clearly warned the employee of the deadline and the possibility of losing the leave; and
  • the employee nevertheless decided, consciously and with full knowledge of the consequences, not to take the vacation.

If the employer cannot prove this, the leave may not be automatically cancelled. This position stems from the judgments of the Court of Justice of the European Union in Cases C-684/16 and C-619/16, and was also adopted by the Slovenian Supreme Court in its previously mentioned Slovene judgment and clearly states that an employee cannot automatically forfeit their entitlement to unused holiday simply because they have not submitted a request to take it.

Does the employer have to pay out unused vacation time?

As a general rule, annual leave is not allowed to be compensated with a cash payment during the term of the employment relationship. Article 164 of the ZDR-1 stipulates that an agreement on cash compensation for unused annual leave is invalid, except upon termination of the employment relationship.

As long as the employment relationship continues, the employer must first and foremost allow the employee to actually take the leave. If the employer fails to do so and, as a result of the employer’s conduct, it later becomes impossible to take the leave, the employee may, under certain conditions, also claim damages for breach of contractual obligations. The Supreme Court confirmed this possibility in its already mentioned judgment.

Upon termination of the employment relationship, an employee may be entitled to monetary compensation for unused vacation time. The employer may avoid this payment if it proves that it provided the employee with a timely opportunity to take the vacation, urged the employee to do so, and warned the employee of the consequences, yet the employee consciously decided not to take the vacation.

Recommended measures for employers

It is recommended that, in addition to the annual notice regarding the allocation of vacation time, the employer also establish a documented system for monitoring its use.

In particular, the employer should:

  • maintain up-to-date records of unused vacation;
  • require employees to plan at least two weeks of vacation in a timely manner;
  • inform employees during the year of their unused vacation balance;
  • send each employee an individual written reminder before the deadline expires;
  • specify in the notice the number of remaining days, the deadline for taking the leave, and the consequences of failure to take it;
  • actually enables the employee to take the leave and appropriately arranges for their replacement;
  • retain notifications, reminders, employees’ responses, and rejections of proposed dates.

While a general notice posted on the bulletin board or sent to all employees is useful, due to the burden of proof, it is also recommended to send an individual notice to each employee who has a significant number of unused days.

We offer support in preparing appropriate notices to employees, guidelines on planning and taking annual leave, and a review of internal procedures, all in accordance with applicable law and case law.