Can I cancel my employee's holiday?

When employees book holiday, it is generally understood by employers that requests can be refused for legitimate reasons or they can request employees to take holiday for specific dates and time periods – but what about pre-booked leave. Can an employer cancel pre-booked annual leave and if so on what grounds?

Legitimate reasons

It is important to ensure you have “a legitimate business reason” for cancelling an employee’s pre-booked holiday. Employers are legally allowed to refuse a request if they feel the needs of the company or business cannot be met or if several people are off at the same time. Some examples of this can be:

• Critical deadlines;
• Increased workloads;
• Holidays seasons, such as Easter or Christmas; or
• Unexpected staff absences (e.g. illness, or emergency leave).

It is generally advisable to set out the circumstances that may affect an employee’s request for holiday or pre-booked leave in the contract of employment.

These legitimate reasons can also be applicable in the event of employees requesting to use their holiday entitlement during their notice period. However, employees are entitled to pay in lieu of untaken holiday so it is worth bearing that in mind. It is usually more cost effective to allow employees to take this holiday than not.

Alternatives to cancellation

Employers may want to also consider reasonable alternatives to cancelling holiday. It is important to ensure that cancelling holiday does not cause the employee to be unable to use up their full statutory holiday entitlement before the end of the company’s holiday year. If this becomes the case, employers face the possibility of being in breach of:

• Regulation 13 of the Working Time Regulations 1998, which lays out an employee’s general entitlement to annual leave; and
• Regulation 15, which lays out the requirements in place for cancellation and notice of annual leave.

Another alternative is that employers may allow employees to carry forward untaken holiday over the statutory minimum to the next holiday year so that employees do not lose any of their holiday entitlement following a cancellation. However, agreement to this is entirely at the employer’s discretion and should be stated in the employee’s contract of employment.

Notice periods

If employers are decided on cancelling holiday, employees should receive as much notice as possible of the cancellation and in writing – this amount of notice should be set out in the employee’ contract of employment.

Under the Working Time Regulations 1998, the minimum notice an employer is required to give to the employee must be the same period of time as the period of leave booked. For example, if the employee has booked a week off, the employer is required to give notice of cancellation at least one week before the first day of leave.

Can employees cancel their own pre-booked holiday?

If an employee wishes to cancel their own holiday, employers do not have to agree to this request unless the entitlement to cancel holiday is set out in the employee’s contract of employment. Employers may have grounds to refuse the cancellation.  It may be due to the cancellation not being in the best interest for the business, or if cover for the employee’s holiday has already been arranged.

An exception to this would be in the case of the employee being on sickness absence and not being able to take their holiday at that time. An employee cannot be on annual leave and on sick leave at the same time. They have the right to choose whether they treat a day off during a period of sickness as sick leave or annual leave.  If they fall ill during a period of annual leave they are entitled to move to sick leave and to take their annual leave at a later date.  In these cases, employees should make sure they follow the company’s sickness absence procedure.  Similarly if they are off work due to ill health they may still treat that time as annual leave provided they comply with the employers requirements so far as booking annual leave is concerned.  Some employees may choose to do this if they do not receive full pay during periods of sickness and they have accrued holiday pay that they could use to cover their absence.

Unfair cancellation of holiday

Employees may subsequently raise a grievance and/or have a claim for breach of contract and/or constructive dismissal if the employer has not satisfied the above requirements.

Constructive dismissal occurs where an employee resigns in response to an employer’s breach of contract and asks the Employment Tribunal to treat their resignation as a dismissal.  Most employees rely on a breach of the implied term of Mutual Trust and Confidence, often saying that the employer has deliberately treated them unfairly.

For a resignation to amount to a constructive dismissal the reason for resigning must be serious and not trivial, for example:

• payment is not made or sudden demotion without cause;
• forced to accept unreasonable changes – this would relate to unreasonable cancellation of pre-booked holiday; or
• harassment or bullying from other employees.

Cancelling employees’ holidays should been seen as a last resort, after considering all other options, as this will have a significant impact on morale and engagement. In addition, if the employee has incurred costs relating to their holiday, this may lead to financial loss if their holiday is cancelled. The responsibility for those costs could be covered in the employee’s contract of employment or paid at the employer’s discretion.  Whether or not the employee can recover their losses will depend on whether the actions of the employer amount to a breach of contract.

In summary, employees annual leave can be cancelled by an employer where:

1. Legitimate business reasons have been laid out;
2. It is lawful to do so;
3. Alternatives to cancellation have been considered and offered;
4. Adequate notice has been given; and
5. The employee’s overall holiday entitlement is not negatively affected.

If these points have not been satisfied, employers could potentially face claims of breach of contract and/or constructive unfair dismissal.

Speak to our employment law solicitors

If you'd like to discuss the laws around employee holidays, contact one of our employment law solicitors today by calling 023 8071 7717 or emailing employment@warnergoodman.co.uk.