Altering the amount of vacation and when employees get it
Question: Is changing vacation policy (such as when employees receive more vacation) considered a fundamental change that requires notice, or can it be effective immediately?
Answer: When considering amendments to vacation policy, the first issue to be addressed is whether the change would be a constructive dismissal. A constructive dismissal occurs where an employer makes a unilateral, fundamental change to a term or condition of employment without providing reasonable notice to the employee. A change of this magnitude amounts to a repudiation of the contract of employment.
Two of the most common types of constructive dismissal are demotions and reductions in remuneration. A reduction of 20 per cent or more will usually qualify as fundamental change, while reductions of 10 per cent or less generally will not. Decreases between those thresholds will normally require an assessment of the context and circumstances: see Pavlis v. HSBC Bank Canada. This same percentage analysis can often be applied to benefits and vacation time.
Of course, it is never that simple. Contextual factors will also be examined and a finding of constructive dismissal will depend on all the circumstances of the case. In Hamilton & Olsen Surveys Ltd. v. Otto, the Alberta Court of Appeal ruled that the withholding of the company’s contribution to the plaintiffs’ RRSP plan and the reduction of their annual vacation from six to four weeks was not a constructive dismissal, as the changes affected all staff and were caused by external economic pressures. In other cases, the courts have found that the cumulative effect of changes which separately would not be fundamental, can together amount to a constructive dismissal: see Schwann v. Husky Oil Operations Ltd. and Kussmann v. AT & T Capital Canada Inc.
When an employer plans to change vacation policies, it is good practice to provide advance notice and an explanation.
If there is a risk the change may be sufficiently fundamental to be a constructive dismissal, the employer may be able to avoid legal claims by giving the affected employees reasonable notice of the change. In most Canadian jurisdictions, the amount of notice required is equivalent to the notice entitlement for termination without cause. If the change affects a large number of employees, it will often be advisable to determine the lengthiest notice period required and give all employees that amount of notice so the change can be implemented on a common date. See Pavlis v. HSBC Bank Canada, 2009 CarswellBC 939 (B.C. S.C.); Hamilton & Olsen Surveys Ltd. v. Otto, 1993 CarswellAlta 108 (Alta C.A.); Schwann v. Husky Oil Operations Ltd., 1989 CarswellSask 325 (Sask. C.A.);
Kussmann v. AT & T Capital Canada Inc., 2002 CarswellBC 926 (B.C. C.A.).
