Dr Felix Musukubili
This article is informed by the enormous number of complaints and/or disputes referred to the ministry of labour and to the Office of the Labour Commissioner for conciliation and/or arbitration. It is for this reason that I thought it appropriate to shed light on the application and effect of sections 23 & 37 of the Labour Act, 2007 (Act No 11 of 2007) (hereinafter referred to as the “Labour Act”).
An employee is defined by the Labour Act “as an individual, other than an independent contractor, who- (a) works for another person and who receives, or is entitled to receive, remuneration for that work; or (b) in any manner assists in carrying on or conducting the business of an employer.”
The right to annual leave is a basic condition of employment that accrues to every employee as provided for in s 23 (2) of the Labour Act.
In terms thereof, the employer is obliged to grant to an employee at least four consecutive weeks of annual leave with full remuneration in respect of each leave cycle completed calculated, as per the table provided under the section cited above. Where an employee does not work a fixed number of days, such an employee is entitled to annual leave calculated based on the average number of days worked per week over the 12 months before the commencement of a new annual leave cycle.
Clearly, this section presupposes that an employee ought to take his/her leave after every leave cycle without any need for accrual.
Notwithstanding the requirement to complete a leave cycle before an employee accrues the requisite number of days, the Labour Act creates some flexibility to allow an employee to take occasional leave while his/ her leave cycle runs. In such case, the employer is entitled to reduce the number of days taken as occasional leave with full remuneration, as espoused in s23 (4). It is imperative to point out that it is within the domain of the employer to determine when leave should be taken by the employee at the end of the leave cycle. Such accrued leave must be taken either within the first four months after the end of the annual leave cycle, or six months thereafter.
The six-months extension is on condition that the employee agrees to such an arrangement with the employer within the first four months after the end of the cycle. For this purpose, the leave cycle starts from the month an employee is appointed, and subsists for 12 months.
To give effect to this provision, it is incumbent on the employer to inform the employee in writing to take his/her accrued leave. The employee can, therefore, not refuse to take leave, as refusal to do so would consequently result in the forfeiture of his/her accumulated leave for the preceding cycle.
To reiterate the above, s10 of the Labour Act unequivocally prohibits the employer to pay an employee an amount of money in substitution for the annual leave to which the employee is entitled.
This is irrespective of whether or not the employee agrees to such in writing.
Therefore, payment for leave days accrued is only permissible at termination of employment, as specifically stated in s 37 of the Labour Act. However, such payment is not automatic, but is subject to complying with the requirements set out in s 37 (3) of the Labour Act.
The section states that an employee will not be entitled to accrue annual leave pay, if the employee without good cause fails to give the appropriate notice of termination stated in s 30 of the Labour Act to work the full period of the notice.
In this instance, the obligation shifts on the employee to pay the employer the remuneration equivalent to the notice period he would have ordinarily worked.
Having said the above, it should be understood that the purpose of leave credit or accrual is not to save as a banking account so that when such leave falls due, the employee has invested sufficient leave days in the hope of getting a large amount of money of leave pay on termination of employment.
The purpose rather, as (Parker, Labour Law in Namibia p86) asserts, is to enable an employee to rest to render better service after resting. The author further submits that not taking leave is detrimental to productivity and efficiency in an organisation. Moreover, in Municipality Council of Windhoek v Petrus Gerthardus Swarts (case no LC01/2004 (HC) at [11], the court held that “leave is ostensibly designed for restorative purposes for the good of the employee, let alone the good of the employer. Therefore, not for banking purposes.
According to the above, the question that arises is whether an employee who had declined to take leave due to him/her, is entitled to an amount of money in lieu of the leave upon his separation from his employer.
This question was answered in the negative both in South Africa in the case of Reed v Richmond Local Board (1923 AD 50,) and in the recent case in Namibia in Rehoboth Town Council v Labour Commissioner (APP -AAA-2022/00035) [2022] NALCMD 75. In both cases, the court stated that if an employee refuses to go on leave when leave to which he/she is entitled to falls due, he/she should not be paid any amount in lieu of such leave.
In the Rehoboth case supra at [10], the court warned that where there is incontrovertible evidence that the employee knew he/she had accrued leave days of more than the prescribed threshold, in this case, more than 60 days, and where the employee was given a sufficient warning in writing to take excess days and fails to do so, the consequence is the forfeiture of those days.
It is for the above reason that the court cautioned employers against a practice which permits an employee to accumulate countless leave days and be paid money in lieu of such ‘innumerable accumulated leave days to be inimical’ to the object of the Labour Act.
Justice Parker in the Rehoboth case points out some of the objectives of the Labour Act, including among others promoting and ensuring the health, safety and welfare of employees. Consequently, employees not taking leave when it is due is not conducive to their health, safety and welfare.
Notwithstanding, the inadvertent accrual of leave days in s23 of the Labour Act, pending taking leave thereof, many employers have adopted generous approaches of allowing employees to accrue leave days up to a certain threshold, over and above the four consecutive weeks. For example, a government employee can accrue up to 60 days from previous leave cycles, and in the private sector, accrual depends on various employers’ leave policy provisions. Such limitations or thresholds need to be codified in the company’s policy or personnel rules of the employer.
Once such practice is codified in the policy, it will form an integral part of the terms and conditions of employment between the employer and the employee, and will therefore be consistent with the spirit of s 9 (2) of the Labour Act to be more favourable to the employee.
In the final analysis, it is important to note that when interpreting and applying s23 of the Labour Act, one ought to take into consideration that ‘leave pay’ payable on the termination of contract of employment as espoused in s 37 (1) must only be in respect of annual leave that an employee could not reasonably be expected to take when it fell due, or in respect of any number of unutilised leave days which an employee is allowed to carry forward in terms of his contract of employment or company policy or personnel rules.
It is, therefore, incumbent on employers to inform their employees in writing when leave ought to be taken to curtail the costly possibility of leave liability and to ensure the welfare of employees, which ordinarily should result in high productivity and the efficiency of the organisation.
On the other hand, an employee needs to understand and appreciate that at every anniversary month, he/she is entitled to take the accrued leave days as contemplated in s 23 under the table provided therein.
Failure to do so, the employee faces the risk of forfeiture of such leave days, and will have no recourse to compel the employer to pay for such leave as same would have been prescribed or forfeited.
*Dr Felix Musukubili is an employment law expert, writes this piece as a candidate legal practitioner, and has served as director for labour services in the ministry of labour. The views expressed herein do not represent that of his current employer.