Historically, the Employment and Labour Relations Court (ELRC) has held that annual leave is a basic right that cannot be forfeited. The position was that leave must either be utilized by the employee or encashed (paid out) by the employer. This was affirmed in cases such as John Kyalo Mulela v Pan African Logistics Limited [2017] KEELRC 1059 (KLR) and Fancy Jeruto Cherop & Nancy Jepkemoi Kiyai v Hotel Cathay Limited [2018] KEELRC 149 (KLR) where the Courts held that the Employment Act, 2007 does not provide for the forfeiture of annual leave. Forfeiture of leave is a term that is alien to the Act. The employer was to ensure that employees either took the annual leave when due or were compensated for it in lieu.
The Court of Appeal clarifies the 18-month Rule
In a recent judgment in Bins (Nairobi) Services Limited v Hardard Macharia Kariamburi [2025] KECA 1726 (KLR) delivered on 24th October 2025, the Court of Appeal has clarified that annual leave days are forfeited if not taken within 18 months of the year they accrued.
In this case, the employee claimed that during his employment spanning eight (8) years, he was not allowed to go on annual leave due to the heavy workload. However, he did not provide any proof that he had applied for leave and the same was denied, or that he had carried forward any leave days. He, however, admitted to using a portion of his annual leave days between 23rd December and 4th January of every year when the office closed for the holidays. The employee sought compensation for the balance of the leave days not taken.
The Court of Appeal’s decision centered on Section 28(4) of the Employment Act. The Court affirmed that where an employee utilizes a portion of his annual leave days within a given year, they must exhaust the balance of the leave days within eighteen (18) months from the end of that year, otherwise the leave days are forfeited.
The Court noted that the employee did not produce any evidence showing that he applied for leave within 18 months and was denied by the employer. Alternatively, he should have proved that he had accumulated his leave days with the employer’s approval.
Can an Employer Set a shorter Forfeiture period?
It’s important to note that the Employment Act provides the minimum terms and conditions of employment. The employer cannot create policies or contractual terms that are less favourable than the provisions of the law. In Richard Abiero v Nyali Golf and Country Club Limited [2020] KEELRC 522 (KLR), the Court held that a contract clause stating leave would be forfeited if not taken within the same year was illegal and against the “spirit and letter of the law.”
Similarly, in Ogila v Dawa Life Sciences Limited [2025] KEELRC 1144 (KLR), the employer issued an internal memo that only seven (7) days could be carried forward into the new year and were to be used within the first three (3) months of the new year. The Court held that the company’s internal memo was in direct conflict with the law, which allows for the accumulation of annual leave days up to 18 months after the year they were earned.
Key Takeaways
· Annual leave days not taken within 18 months of the year they were earned are forfeited.
· An employment contract or company policy cannot compel employees to forfeit their accrued annual leave days earlier than 18 months after the leave-earning period. Employees should, however, ensure to take a portion of the leave days within the leave-earning year.
· The employer and employee can agree on how annual leave will be taken.
· To claim compensation for outstanding leave days older than 18 months, an employee must provide evidence that they applied for leave and were denied, or that the employer agreed to a longer carry-over period.
· Employers and employees should still actively manage leave schedules to ensure employees take their leave days within the year they are earned.
Contact Person & Contributor: Isabel Gakuo – Employment Law Associate
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