The Employment Law position on these matters is slightly complicated. The starting point is to consider what the parties to the employment contract have agreed in that contract, and in some situations what they are deemed to have agreed through their ongoing actions. This will often be viewed as meaning that an employer's "use it or lose it" rule can be enforced. However, employees' and workers' holiday entitlements derive both from employment contracts and from statutory employment law. Statutory employment law on holiday leave and pay entitlement come from the Working Time Regulations, which must, in turn, meet the minimum requirements set down by the European Union's Working Time Directive. As a result, the interpretation of the Working Time Directive by the Court of Justice of the European Union (CJEU) has a direct impact on the employment law rights of employees and workers in the United Kingdom in this and other areas of employment law.
Under the Working Time Regulations, it has been clear for some time that the Employment Tribunals and the Courts will find that holiday entitlement will carry forward by law (at least for a reasonable period) in the event that the employee or worker is unable to take those holidays due to maternity leave, sick leave, or due to an employer who refuses to allow, or makes it impossible for the leave to be taken. This would be the case regardless of what the employer's employment contracts provide.