Introduction
Annual leave, often referred to as vacation time, is a fundamental entitlement in modern employment relationships. It represents a crucial period of rest and recuperation for employees, essential for their physical and mental well-being, and ultimately, for sustained productivity. Beyond its immediate benefits to the individual worker, annual leave plays a vital role in fostering work-life balance, preventing burnout, and contributing to overall industrial harmony. Labor laws globally, including in Ethiopia, establish minimum standards for annual leave, recognizing it not merely as a perk but as a fundamental human right. This chapter explores the entitlements and limitations pertaining to annual leave under Ethiopian employment law, as primarily governed by Labor Proclamation No. 1156/2011, examining its constitutional underpinnings, practical application, and areas of contention.
The Constitutional Basis of the Right
The right to annual leave in Ethiopia is not merely a statutory provision; it is a constitutionally enshrined minimum working condition. Article 42, Sub-Article 2 of the Constitution of the Federal Democratic Republic of Ethiopia (FDRE) explicitly states that workers have the right to “appropriately determined working hours, rest, recreation time, periodic paid leave, paid public holidays, and a healthy and safe working environment.” This constitutional mandate establishes annual leave as an inalienable right that cannot be curtailed or restricted by an employment contract, collective agreement, or work rules.
The Federal Supreme Court Cassation Bench has consistently reinforced this constitutional underpinning. In S.C. File No. 82336 (Abjata Soda Ash Share Company and W/ro Martha Abebe, January 20, 2005 E.C., Vol. 14), the Cassation Bench provided crucial guidance, emphasizing that the Labor and Employment Law should be interpreted by considering its general objective and the rights of workers stipulated in Article 42 of the FDRE Constitution. This judicial stance highlights the principle of harmonious interpretation, where statutory provisions are to be read and applied in a manner consistent with higher constitutional guarantees, ensuring that labor legislation serves its protective and welfare-oriented purpose.
The primary rationale for legislating annual leave and other minimum working conditions stems from the inherent imbalance of power in the employment relationship. Employees, often possessing limited bargaining power, require legal safeguards to protect them from unfair employer influence and potential exploitation. Industrial peace and a stable labor market cannot prevail where these fundamental minimum working conditions are not respected. The minimum working conditions stipulated in labor and employment law, particularly concerning working hours and rest, are fundamental rules designed to provide protection and safeguards for the health, safety, and human dignity of all employees. Employees require a certain period of rest to prevent physical and mental exhaustion, maintain their health, and, fundamentally, because they are human beings entitled to periods of respite. The core purpose of annual leave must be viewed from this holistic perspective, emphasizing its social welfare function over purely economic considerations. A clear understanding of this fundamental purpose is crucial to prevent distorted legal interpretations.
The Federal Supreme Court Cassation Bench has, at times, articulated the necessity of annual leave with a focus on employee performance. In a decision rendered on October 30, 1998 E.C. (Applicant Ethiopian Insurance Corporation and Respondent Ato Getahun Haile, S.C. File No. 14057, Vol. 3), the court stated:
“The employee is expected to be present at work in a mentally and physically fit condition. One of the primary reasons for granting annual leave is to enable the employee to fulfill this expected obligation.”
Similarly, in S.C. File No. 27959 (Applicant Ethiopian Postal Service Enterprise and Respondent Ato Ali Mohammed Ali, November 3, 2003 E.C., Vol. 6), the Cassation Bench reflected a similar stance:
“…weekly or annual rest, or the law’s compulsion to work only a certain number of hours per day, is to enable the employee to increase their work productivity by resting their tired mind and body and maintaining their physical and mental health.”
While these judicial pronouncements acknowledge the practical benefits of rest for productivity, if our perspective on annual leave is solely that it is a tool to help the employee fulfill their obligations, rather than a standalone human right, we risk embarking on a flawed theoretical path. Tracing its historical roots, the impetus for legislating annual leave, working hours, and other minimum working conditions—both nationally and internationally—was primarily to curb the exploitation of labor and the violation of rights committed by employers under the guise of the free market system. It was not primarily because an employer’s productivity or profit might decrease due to an employee’s “unfit mental and physical condition” or solely because minimum working conditions have direct economic benefits for the employer. This distinction is crucial: the right to rest is rooted in human dignity and protection, not merely as a means to optimize economic output.
Amount of Annual Leave
The amount of annual leave granted to employees varies significantly across countries, reflecting diverse economic contexts, labor traditions, and social priorities. Globally, the range typically spans from a minimum of ten to a maximum of thirty working days. For instance, Japan and Canada are known for providing relatively minimal annual leave, with employees in these countries receiving a minimum of ten and fourteen days respectively for their first year of service. In many African countries, the minimum annual leave generally ranges from fifteen to nineteen working days on average, while in many European countries, the average is higher, typically twenty to twenty-five days. Among the countries where employees receive a substantial amount of annual leave, France is notable, where an employee can receive up to thirty working days, three times that of a Japanese employee. A common principle across most jurisdictions is that the amount of leave increases with the employee’s length of service, recognizing loyalty and accumulated contribution.
In Ethiopia, for employees governed by Labor Proclamation No. 1156/2011 (primarily the private sector), the legally stipulated minimum annual leave for the first year of service is sixteen working days. For employees governed by the Federal Government Employees Proclamation and other special laws, this amount is typically increased by four additional working days. A key distinction lies in the increment for subsequent years of service. For federal government employees, the amount of leave increases by one working day for each subsequent year of service. However, for private sector employees under Proclamation No. 1156/2011, an amendment from the previous Proclamation No. 377/96 changed the increment from annually to every two years. This means a private sector employee gains an additional day of leave only after completing two years of service beyond their initial year, and then every two years thereafter.
While determining the amount of leave based on service period seems like a straightforward calculation, requiring no more than simple addition, judicial errors can occur. Even the Cassation Bench, which bears the heavy responsibility of correcting fundamental errors of law, has not always been immune to such errors. To understand the nature of this problem, we can examine two decisions rendered when Proclamation No. 377/96 was in force, though the principle of accurate calculation remains relevant.
In S.C. File No. 92410 (Applicant China High Way Limited and Respondent Ato Wubshet Engidaw, January 29, 2006 E.C., Vol. 16), a significant error was observed regarding the calculation of annual leave. The facts established that the respondent had served for 2 years, 6 months, and 15 days (from 30/2/2002 E.C. to 15/02/2005 E.C.) and had not taken any annual leave. Despite these clear facts, the calculation of the respondent’s annual leave by the lower courts and the Cassation Bench was inconsistent. The Federal First Instance Court awarded 29 days of annual leave to be converted into money, a decision upheld on appeal. However, the Cassation Bench reduced this amount by 13.5 days, amending the lower courts’ decision to award only fifteen and a half days.
According to the correct calculation based on Proclamation No. 377/96, Article 77(1)(a) and (b) (which provided for 14 days for the first year, plus one day for each subsequent year):
- For the first year: 14 working days.
- For the second year: 14 + 1 = 15 working days.
- For the third year: The respondent served for 6 months and 15 days. Annual leave for a full third year would be 14 + 2 = 16 days. For a proportionate calculation, since he served for approximately half a year (6 months), he would receive half of sixteen days, which is 8 days. The remaining 15 days of service would also be proportionately calculated.
- More precisely, 6 months and 15 days out of 12 months for the third year. (6.5/12)×16 days≈8.67 days.
- Therefore, the total annual leave to be converted into money for the respondent should have been 14+15+8.67=37.67 working days. The discrepancy highlights the critical importance of accurate mathematical calculation in judicial decisions involving monetary entitlements, as even small errors can lead to significant discrepancies.
The repetition of such errors, as seen in S.C. File No. 112583 (Applicant Ethiopian Red Cross Society Jimma Branch and Respondent Ato Biruk Abera, October 5, 2008 E.C., Vol. 19), indicates a systemic issue requiring judicial attention. In this case, the Cassation Bench’s commentary and legal interpretation regarding the respondent’s service period and annual leave calculation read:
“Since the respondent’s service in the applicant’s office in [2006 E.C.] was only 7 months, the annual leave he is entitled to for this service is only 8 days, and as understood from the lower court’s decision, since he has an additional two years of service, adding two days, the annual leave he should receive will be ten days (10).”
A correct calculation based on Proclamation No. 377/96, Article 77(1) for a service period of two years and seven months would be:
- First year: 14 days.
- Second year: 15 days.
- Seven months in the last year: (7/12)×16 days≈9.33 days.
- Total: 14+15+9.33=38.33 days.
These examples underscore the need for meticulous attention to detail in applying statutory formulas, even in seemingly simple calculations, to ensure judicial accuracy and fairness in determining employee entitlements.
Granting and Using Leave
The effectiveness of the right to annual leave is largely determined by the manner in which it is implemented. The timing and conditions for granting annual leave should primarily consider the employee’s preference, while also taking into account the employer’s operational interests. If an employer cannot predict in advance who will take leave and when, accommodating fragmented leave requests throughout the year can significantly disrupt the organization’s normal operations. Recognizing this potential conflict, the law attempts to reconcile the interests of both parties by stipulating that the employer should grant annual leave by preparing an annual leave program that balances its organizational operations with the employee’s preferences. This reflects the principle of managerial prerogative balanced with employee rights, a common feature in labor law designed to ensure both business continuity and worker welfare.
Crucially, once an employee is on leave, their employer generally has no concern over the purpose or objective for which the employee uses their rest period. During their leave days, employees are free to visit distant family, travel the country, renovate their home, or engage in any other activity they choose, including spending time on social media. This freedom underscores the personal nature of rest and recreation. However, in some countries, this freedom is partially restricted, particularly when the employee engages in work similar to that of their employer or any other income-generating work while on annual leave. International agreements concerning annual leave also permit such partial restrictions. This relates to the concept of loyalty to the employer and preventing unfair competition during periods of paid leave, ensuring that the employee’s time off does not directly disadvantage their primary employer.
Overlapping Leave
The issue of overlapping leave, specifically when annual leave coincides with sick leave, is addressed by international labor standards. Two key International Labour Organization (ILO) conventions concerning paid leave, the Holidays with Pay Convention, 1936 (No. 52), and the Revised Convention on Holidays with Pay, 1970 (No. 132), similarly stipulate that if annual leave overlaps with sick leave, the annual leave is not counted. This means that if an employee on annual leave falls ill and is granted sick leave, their annual leave is suspended, and they begin using their sick leave entitlement. After the sick leave ends, their annual leave resumes from where it left off, ensuring that the purpose of annual leave (rest and recreation) is not undermined by illness.
Ethiopia’s previous labor law (Proclamation No. 377/96) was consistent with these international conventions. Article 79(4) of that Proclamation stated that if an employee on leave falls ill, the provisions concerning sick leave apply. However, the amended Proclamation No. 1156/2011 has introduced a significant inconsistency. Article 79(5) of the current Proclamation narrows its applicability by stating, “…annual leave shall be interrupted and sick leave granted only for the period during which the employee was hospitalized in a medical institution.”
This amendment presents several critical issues. First, in a country where access to hospital beds can be challenging and waiting times for hospitalization can extend to months, making “hospitalization in a medical institution” a prerequisite for interrupting annual leave demonstrates a disconnect between the drafters and the practical realities on the ground. Second, resting from work and resting from illness are distinct concepts. An employee whose illness has been certified by a doctor as requiring rest is not resting their mind and body from work in a recreational sense, but rather from the debilitating effects of illness. Instead, they spend their time in exhaustion and distress, potentially even more so than if they were working. Both hospitalized and non-hospitalized patients share this difficult situation equally. This amendment highlights a potential disregard for practical realities and a significant narrowing of worker protections compared to international standards, potentially undermining the very purpose of both annual leave and sick leave. It represents a step backward in terms of employee welfare and social protection.
Payment in Lieu of Leave
A fundamental principle in labor law, shared by national legislations and international conventions concerning leave, is the strict prohibition against converting annual leave into monetary payment. This prohibition is absolute because paying money instead of granting leave renders annual leave meaningless. An employee’s human dignity and health necessitate that they receive a certain number of days of physical and mental rest after working throughout the year. No monetary payment, however substantial, can be an equivalent substitute for this essential period of rest. This is why the prohibition is generally absolute, with no exceptions permitted while the employment contract is in force. That is, there are no acceptable compelling reasons that would allow for payment in lieu of leave when the employer-employee relationship has not been terminated. This principle emphasizes the inalienable nature of the right to rest and its paramount importance for worker well-being, which cannot be monetarily compensated.
Proclamation No. 1156/2011, Article 76(2), generally prohibits payment in lieu of annual leave. However, the provision makes an exception with the phrase ‘unless otherwise permitted by this Proclamation.’ While the exception should ideally be limited to situations where the employment contract is terminated (a common and internationally accepted exception), the Ethiopian law deviates from international conventions by permitting payment in lieu of leave even when the employment contract is in force.
There are two specific exceptions in the Proclamation where payment in lieu of leave is permitted. The first, and standard, exception applies when the employment contract is terminated, as stipulated in Article 77(4), where an employee whose employment contract has been terminated is paid for any untaken annual leave. The second exception is a special circumstance where payment is permitted even if the contract is not terminated: if an employee on leave is recalled by the employer, the remaining annual leave is converted into money. The fundamental problem with this second exception stems from the unlimited authority granted to the employer. As stipulated in Article 80(3), an employee on leave may be recalled if their presence at work is required due to an unforeseen reason. Beyond granting the employer the power to recall, the Proclamation, by permitting the recalled employee to receive their remaining annual leave converted into money instead of taking it at another time, has opened the door for the right to be practically ‘eroded.’ This creates a potential for employer abuse of discretion and significantly undermines the very purpose of annual leave, transforming a period of mandatory rest into a discretionary financial transaction.
Legal Effect of Leave Carry-Over
Article 77, Sub-Article 5, in both the Amharic and English versions of Proclamation No. 1156/2011, states: “A worker whose contract of employment is terminated under this proclamation is entitled to his pay for the leave he has not taken.” For anyone reading this provision, its content appears clear and unambiguous. “Untaken annual leave” simply means unused leave, leave not taken, or leave that was not granted. Its meaning is straightforward and requires no complex legal interpretation.
Therefore, there is no logical reason that would lead to the misguided conclusion that ‘what is paid to the employee is not untaken leave, but annual leave not carried over for more than two years.’ Nor can there be. If one asserts that annual leave, if carried over or untaken beyond a certain period, ‘imposes a limitation on the employee’s right to payment upon contract termination,’ this stance must be reconciled with the necessity of annual leave, the fundamental objective of labor law (which is primarily protective), and related constitutional provisions. The view that annual leave carried over for more than two years ‘burns’ (i.e., is forfeited) is contrary to the fundamental objectives of the law and cannot be reconciled with law or logic.
It is discernible that some courts, knowingly or unknowingly, might be influenced by the intellectual path of New Institutionalism or similar economic theories that prioritize employer productivity and flexibility. From such a perspective, the idea that annual leave burns if carried over for more than two years might indeed align with a lenient stance towards employers, reducing their liabilities. However, this approach often overlooks the core social justice and worker protection principles underlying labor law.
The provisions of labor law must always be interpreted in a manner that gives full effect to constitutional rights. If we follow this path, determining the legal effect of annual leave carried over for more than two years becomes straightforward. Since annual leave is a constitutionally derived right, the employer is unequivocally obliged to grant it to the employee. There is no loophole through which they can escape this obligation. The Proclamation has adequately closed any loopholes that might arise in the implementation of this right. The fact that the employer is obliged to prepare an annual leave program and grant leave annually (Article 78(1) and (2)), the explicit prohibition of payment in lieu of annual leave (Article 76(2)), and the nullity and worthlessness of any agreement to waive the right to annual leave (Article 76(1))—all read together—confirm that the law has provided robust protection and safeguards for annual leave. This reinforces the non-derogation principle, meaning that statutory labor rights cannot be diminished by individual agreements.
Furthermore, the legal provision that prohibits carrying over annual leave for more than two years, which is sometimes misinterpreted as a limitation on the employee’s right, should, when correctly interpreted, be understood as providing protection for the employee’s right rather than a limitation. The time limit imposed on carry-over guarantees that the employee receives rest annually. The time limit strengthens the employee’s right by imposing a prohibition on the employer. The law is essentially telling the employer: ‘If you face compelling work circumstances, you can carry over annual leave. However, you cannot carry it over for more than two years.’ The clear message of the law must be read in this manner. What if it is carried over for more than two years? If it is carried over, the law has been violated. A person who violates the law is punished, not rewarded. Therefore, an employer who fails to grant leave within the two-year carry-over period is found guilty of the act and is punishable by a fine ranging from five thousand to thirty thousand Birr, depending on the severity and repetition of the offense, according to Article 185(1)(b) of the Proclamation. This penal provision underscores the mandatory nature of the obligation.
What if there is an agreement between the employee and employer to carry over annual leave for more than two years? To answer this, it is first necessary to determine the effect of a carry-over agreement made within the two-year time limit. If the employee explicitly requests that annual leave be carried over and the request is accepted by the employer, annual leave can be carried over to the next year. An agreement made in this manner will have legal effect like any other contract, provided it adheres to the statutory limit. The law recognizes this agreement only up to two years. Even if there is an agreement, annual leave cannot be carried over for more than two years. In other words, an agreement cannot be made to carry over for more than two years.
What if they still agree to carry it over beyond two years? An agreement on a matter explicitly prohibited by law is unlawful and therefore has no legal effect. Therefore, if an agreement has been made to carry over annual leave to the third year or beyond, the employee is not bound by this agreement. Accordingly, without waiting for the year to which the leave was unlawfully carried over, the employee has the right to request and receive leave immediately in the year the unlawful agreement was made. It is not difficult to understand that the law prohibited carrying over annual leave agreements beyond two years due to the inherent disparity in bargaining power between the employer and employee, with the intention of providing protection for the weaker party. Minimum working conditions are not matters to be determined by individual agreement; they are mandatory statutory entitlements.
Conversely, the stance that leave carried over for more than two years by agreement ‘burns’ is a contradictory position that has lost its contractual basis. To say that annual leave carried over for more than two years by agreement ‘burns’ means that the effect of the agreement renders the right void. An agreement to render a right void is, in essence, an agreement to waive a right. However, Article 76(1) explicitly states that such an agreement is worthless:
“Any agreement whereby a worker waives his right to annual leave shall be null and void.”
This applies in any circumstance, even by agreeing to carry over for more than two years. The law’s intent is clear: the right to annual leave is fundamental and inalienable, and cannot be forfeited or waived, whether through explicit agreement or through a misinterpretation of carry-over provisions.
Conclusion
Annual leave is a cornerstone of employee protection and well-being, constitutionally guaranteed in Ethiopia. While Labor Proclamation No. 1156/2011 outlines entitlements and mechanisms for granting leave, its application reveals areas of both strength and concern. The shift to biennial leave increment for the private sector, coupled with judicial errors in calculation, highlights the need for greater clarity and precision. The restrictive approach to overlapping sick leave and the problematic allowance for payment in lieu of leave upon employer recall represent potential erosions of worker protections compared to international standards and previous legislation.
Crucially, the interpretation of leave carry-over provisions must consistently uphold the constitutional right to rest. The view that untaken leave ‘burns’ after two years is legally unsound and contrary to the protective objectives of labor law. Instead, the two-year limit should be understood as a mandatory obligation on the employer to ensure employees receive their entitled rest, with penalties for non-compliance. Ultimately, a robust framework for annual leave is essential not only for compliance with international labor standards but also for fostering a healthy, productive, and equitable workforce in Ethiopia.