Employee refuses to use vacation entitlement
Question: If an employee has a vacation entitlement that is greater than the employment standards minimum but refuses to take all of it, is the employer obligated to pay vacation pay equal to that entitlement or is it only obligated to pay out an amount equal to the legislated minimum?
Answer: In Canada, there are basically only two sources of law: the relevant legislation, which is government-made law, and the common law, or judge-made law flowing from the cumulative effect of judgments over time. In the context of vacation entitlement, the relevant legislation would be the employment standards statute. The relevant common law principles are derived from the law of employment contracts as reflected in court decisions over time. Employment standards legislation in all Canadian jurisdictions sets out the minimum amount of vacation time and vacation pay that employees are entitled to receive. Employers may not lawfully provide less than the statutory minimum. However, employers and employees are free to enter into an employment contract that exceeds the statutory minimums, and the enhanced vacation entitlement is a matter of contract between the employer and the employee that can be enforced through the courts.
However, the particulars of any greater or more favourable vacation entitlement will depend on the terms of the contract or agreement between the employer and the employee. Where there is a written agreement, the express terms of the individual employment agreement will dictate that particular employee's vacation entitlement. Unfortunately, in some instances, the meaning of these terms it is not always clear.
In other instances, there may be no written agreement at all. In those cases, it will be necessary to look to what was actually communicated between the parties as well as any relevant past practice of the parties. Thus, it is important for employers to ensure that what they are doing in practice is what they intended upon entering into the employment agreement. It is also preferable that such terms be clearly expressed in writing between the employer and the employee at the commencement of the employment relationship.
Even though an employer is not obligated to offer a greater vacation entitlement than that mandated in the employment standards legislation, it is bound at common law, pursuant to the law of contracts, to honour any greater vacation entitlement it has otherwise agreed to provide to the employee.
Employment standards statutes often include provisions such as this one, taken from section 72 of The Labour Standards Act in Saskatchewan:
“72(1) Nothing in this act or in any order or regulation made under this act affects any provision in any act, agreement or contract of service or any custom insofar as it ensures to any employee more favourable conditions, more favourable hours of work or a more favourable rate of wages than the conditions, the hours of work or the rate of wages provided for by this act or by any such order or regulation.”
Similarly, employment standards legislation usually prevents any agreements for less than the statutory minimums.
In other words, the labour standards minimums, as legislated, do not affect any agreement between employers and employees which results in more favourable conditions than the statutory minimums. Equally, the parties cannot contract out of the statutory minimums and thus provide less favourable conditions than those proscribed. In the present context, this means that an adjudicator would likely find that an employer's vacation policy, if more favourable than the statutory provisions, would prevail over the labour standard minimums.
In summary, despite the fact that an employer has offered a vacation entitlement which is greater than that mandated by employment standards legisation, it remains obligated to honour any additional contractual entitlements it has agreed to provide. If the employee agrees to waive some or all of their enhanced vacation entitlement, it is legally permissible to do so as long as the remaining entitlement is not less than the statutory minimum. It would also be important to commit the terms of any such arrangement to a clear agreement in writing.
