Presumably he means taking his vacation days so he doesn't have to put in any days of work in the 2 weeks after he puts in his notice. I'd guess he isn't American -- the term "holiday" is interchangeable with "vacation" in most of Europe, for instance.
That being said, your point about bank holidays is a good one. Never give your company free labor -- they'll never give you free capital.
I would be careful with this, my last employer refused to pay for unspent vacation days, and if you put in your notice or thought the individual was likely to quit they wouldnt approve your PTO requests. I don't know if this is legal (South Florida), but all the information i find online for this state say that the employer is not required to pay out your time (varies by state).
That being said, your point about bank holidays is a good one. Never give your company free labor -- they'll never give you free capital.