Use it or lose it?
Question: If an employee is warned to take vacation before the end of the year or face losing it but chooses not to take it, does the employer have to provide anything in lieu?
Answer: In Canada, an employer is not permitted to have a “use it or lose it” vacation policy with respect to statutory vacation entitlements. The specific requirements for how an employee is to take vacation time off varies from jurisdiction to jurisdiction.
For example, in Alberta, after the first year of employment an employee must take vacation time off within 12 months of it being earned. In Saskatchewan, employees are also entitled to vacation time after one year of employment and are similarly required to take it within 12 months. Employers must ensure that an employee takes his vacation time off within the required period. As such, if the employer and employee cannot agree on when the employee should take his time off, the employer can unilaterally set the employee’s vacation time, so long as it gives the employee four weeks’ written notice.
Employees in British Columbia are entitled to their annual vacation after completing one year of employment. As in the other western provinces, B.C. employees are required to take their vacation time within 12 months of it being earned and employees are prohibited from foregoing their annual vacation in favor of pay in lieu of time off.
Manitoba’s employment standards legislation requires employees to take their vacation time within 10 months of it being earned. Employers and employees can schedule annual vacation by mutual agreement, but if they cannot agree, the employer can unilaterally set the vacation date by providing 15 days’ notice to the employee. Employees in Ontario must also take their vacation time within 10 months after completing one year of employment and employers are under a similar obligation to ensure that their employees actually take their vacation time before the end of that 10-month period.
Even if the employer provides vacation entitlement over and above the minimum statutory requirements, the employer will still need to carefully consider the applicable employment standards rules. Some employment standards regulators even assume authority over employment agreements that provide vacation time over and above what the legislation provides. This is the case in British Columbia. In British Columbia, where an employer agrees to provide vacation time in excess of the minimum statutory requirements, employment standards officers can enforce that agreement.
It is also important to bear in mind that some businesses may be exempted from vacation provisions or may be subject to different obligations. One example of a frequently exempted class of employees are those who work in the construction industry. For example, in Alberta, employers in the construction industry do not have to give their construction employees vacation time. However, these employees are still entitled to vacation pay of at least six per cent of their wages. This is just one example of how an employer’s obligations will change depending on its class of business. Exemptions are many and vary between provinces. Employers should be careful to confirm whether their business is subject to any such exemptions.
