Is annual leave a right or a privilege?

Is annual leave a right or a privilege?

Many employees operate on the assumption that since their annual leave entitlement is spelled out in their contracts, they are free to go on leave, whenever they want and for any reason, without having to justify it to their employers.  They also believe that their employer has no right to reject their leave applications or forfeit their unused leave.

Their beliefs are only half true: while the law does not require employees to provide reasons for going on annual leave, the law also does not provide that annual leave is a carte blanche right that can be exercised solely at the employee’s discretion.

So, is annual leave a right or a privilege?

BR Ghaiye in “Misconduct in Employment” explains the concept of annual leave:

“The expression ‘leave’ means leave of absence, that is to say, the permission obtained by an employee from his employer relieving him from the duty of attending work… when an employee requires leave, it is necessary to apply for leave even if he has some just cause for absence… no employee can claim as a matter of right leave of absence without permission …”

The Industrial Court has adopted a similar view, having quoted Ghaiye directly as well.  For example, in Azinah binti Aziz v Overseas Assurance Corporation (Malaysia) Berhad (Award 1413 of 2006), the Industrial Court held that an employee who takes leave at their whims and fancies may “as a matter of right give the company no choice but to dismiss them”. The court went on to say that taking leave without approval is a misconduct so serious that the company was entitled to dismiss the employee even though she had been with the company for 20 years.

While employees may be entitled under their contract to a certain amount of annual leave per annum, their employers still retain control over when this leave can be used. Employers are free to reject leave applications at their discretion. Typical reasons for rejecting annual leave applications could include:

  • insufficient notice was given;
  • leave application was not in compliance with the company’s policies or procedures;
  • other employees are already going on leave at that particular time; or
  • the business needs of the company require the employee to be at work (eg: peak period; urgent work that needs to be completed)

The corresponding implication is also that employees do not automatically have the right to use their annual leave to “set off” their notice of resignation (which many assume is a “given”), although this is sometimes done with the consent of the employer. However, the employer still has a contractual right to require the employee to serve the notice in full and attend work every day until their official last day of employment. The alternative is for the employee to make payment in lieu of notice, if they do not want to serve the entire notice period.

The waiver of any notice period is still at the employer’s discretion. Employees should not approach requests for an early exit as a matter of “right”, even if they have annual leave balance. Since parties are free to strike a mutually beneficial agreement regarding the notice period and usage of annual leave balance,  an accurate understanding of each other’s legal rights will be conducive towards reaching an amicable departure.


ABOUT THE AUTHOR. This article was written by Donovan Cheah.  Donovan Cheah is a partner at Donovan & Ho. He is an advocate and solicitor of the High Court of Malaya, and his writings have been featured in publications like The Edge, The Star, the American Chamber of Commerce updates, and Asialaw.

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