Enforcing a policy that prohibits carrying over of holidays
Question: Can a company enforce a "use it or lose it" policy when it comes to vacations, if every employee is made aware of the policy in the employee handbook that states vacations may not be carried over to the next year, and no pay in lieu of holidays will be granted without the prior approval of the president?
Answer: A policy such as this will be troublesome because an employee could potentially receive no compensation for holiday pay.
As a starting point, employment standards legislation generally prohibits an employer and employee from waiving any rights conferred by legislation. Labour standards legislation guarantees a minimum level of rights and benefits that cannot be contracted out of or avoided through the introduction of policy that can have the effect of preventing an employee from accessing her statutory rights. The right to holiday pay is provided by labour standards legislation and is included within the scope of “general wages.” An employer cannot decide, unilaterally through an approval process, to withhold “general wages” that an employee is otherwise legally entitled to.
In jurisdictions such as Saskatchewan, there is no indication that an employer is barred from refusing to permit employees from carrying over accumulated holidays, and using those days the next year. However, an employer is clearly prevented from refusing to compensate the employee in lieu of taking holidays to which the employee is entitled. An employer must provide pay in lieu of holidays within 11 months after the date they became entitled to the annual holiday. Therefore, an employer should be entitled to refuse permission for an employee to bank holidays in order to take them in a proceeding year, but they cannot refuse to pay the holiday pay that the employee is entitled to under the act.
Arrangements can also be entered into whereby the employee agrees to forego vacation time. However these types of agreements do not permit an employee to give up vacation pay. In Saskatchewan, these types of agreements are limited to situations where there is a shortage of labour. Once the agreement is filed with the Director of Labour Standards, the employer is no longer subject to those provisions requiring an employer to permit the employee to take their annual holiday. However, the employer must provide annual holiday pay to the employee within 12 months of the employee becoming entitled to their annual holiday.
Other jurisdictions employ similar provisions. In Ontario, an employee may forego taking vacation time subject to the approval of the Director of Labour Standards and the employer's consent. Unlike Saskatchewan, these types of arrangements are not limited to labour shortage situations. This provision does not permit an employer to forego paying vacation pay to which the employee is entitled.
The only possible exception available to the employer would be to enter into an employment contract that provides for a broader wage package that includes holiday pay. Such arrangements must be compliant with labour standards legislation and common law requirements.
It has been held that the effect of labour standards legislation was to introduce an additional contractual term into a contract of employment by providing that certain amounts defined as wages (including holiday pay) will be paid at the stated rate. In Saskatchewan, the Labour Standards Act prohibits agreements which deprive an employee of any right, power, privilege or other benefit provided by the act. The only manner in which agreements regarding specific benefits would be recognized is if the right conferred by the agreement or policy is greater than that provided by the act.
In Len v. Woodlawn Regional Park Authority, it was held that under Saskatchewan labour standards legislation, there were only two ways that an employer could pay an employee in lieu of actually giving time off. The first is to enter into an agreement stating that an employee will not take vacation time due to a shortage of labour. The second is for the employer to show that the terms of the employment contract are more favorable than the rights and benefits conferred by labour standards legislation. In order to do this, an employer needs to show that the wages include a component of holiday pay and the amount designated as holiday pay exceeds that which is available under labour standards legislation.
In order for an all-inclusive contract to be legally enforceable, it must be clear that the intent of the parties was that the employment contract would include holiday pay. As well, the employment contract must provide benefits that exceed that which is available under labour standards legislation. The portion allocated as holiday pay should be clearly identifiable in order to facilitate an effective comparison between statutory benefits and the benefits contained in the employment contract. So long as the employee gets better benefits than that which is mandated by labour standards legislation, this type of arrangement should be acceptable.
These same considerations apply to a collective agreement. The only way a collective agreement can displace labour standards legislation, is by enhancing those rights conferred by the legislation. If in the relevant time frame, an employee is receiving more than what she would have received under labour standards legislation, the agreement should be valid.
For more information see:
•Len v. Woodlawn Regional Park Authority, 2000 CarswellSask 156 (Sask. Q.B.).
