Pay gap normally topped up; policy barred accrual on LTD

An Ontario arbitrator has awarded a worker vacation pay and leave for the time he was on short-term disability (STD) leave, but not for the time spent on long-term disability (LTD) leave.

Cadillac Fairview is a Toronto-based property management company. Under the collective agreement it had for workers at the Toronto Eaton Centre, employees accumulated vacation leave between June 1 of one year and May 31 of the next.

CF paid vacation pay to the employee when vacation time was taken the following year to ensure the employee received their full pay while away. The collective agreement stipulated that if the vacation pay earned by an employee during a vacation year was less than what was needed to cover his regular wages during vacation leave for the following year, CF would supplement it as necessary.

Jeff Winchester worked at the Toronto Eaton Centre. By June 1, 2017, his years of service — he was hired in October 1986 — entitled him to six weeks of annual vacation leave.

On May 28, 2017, Winchester went on STD leave in accordance with the collective agreement. In September, he transitioned to LTD benefits.

CF’s STD policy allowed employees to accrue vacation at the same rate as if they were working while receiving STD benefits. However, the LTD policy stipulated that employees did not accrue vacation while on LTD. Every May 31, employees on LTD with any unused vacation would receive a payout. Both policies were incorporated into the collective agreement.

While he was on disability leave in the 2017- 2018 year, Winchester didn’t use any vacation leave. CF carried over the vacation pay he had accrued to fund his vacation leave at full pay for the 2018-2019 year.

Winchester returned to work on Aug. 13, 2018. Three months later, the union filed a grievance claiming CF should pay out Winchester’s accrued vacation pay earned in the 2016-2017 year that he hadn’t used while on disability leave and provide a fresh entitlement of six weeks’ vacation for 2018-2019, with CF covering any vacation pay shortfall from his disability leave as required by the collective agreement.

The arbitrator noted that vacation entitlement in the collective agreement was based on the prior year’s accrual for both vacation time and vacation pay. This was consistent with the concept that time off is earned over the course of the year and therefore could be pro-rated based on how much the employee worked.

The arbitrator then found that the collective agreement drew a distinction between vacation eligibility and entitlement, as it set vacation pay to be a certain percentage of all earnings paid for each week of vacation the employee was eligible to take.

As a result, Winchester’s six-week vacation entitlement would have to accrue over the course of the previous year for him to be able to take a full six weeks of vacation in 2018-2019, said the arbitrator.

“The distinction drawn is therefore between the quantum of the entitlement, which is based on years of service, and the eligibility to take that entitlement, which is based on accrual in the prior year,” said the arbitrator. “The concept of eligibility, superimposed on the concept of ‘entitlement’ is consistent with the notion that both vacation time and vacation pay ‘accrue,’ and are not allocated at a single point in time based on years of service alone.”

The arbitrator also found that the LTD policy — which was incorporated into the collective agreement — was clear that vacation did not accrue while an employee was on LTD.

The arbitrator determined that CF should have paid out Winchester’s vacation pay entitlement for the time he was off rather than carrying it forward, but only for the four months he was on STD — two weeks instead of six weeks.