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Postponing or waiving vacation entitlement

QUESTION: Are employees required to take vacation time every year or can they choose to receive vacation pay without time off in some years?

ANSWER: Labour standards laws across Canada require that employees take the statutory minimum amount of vacation time with vacation pay to which they are entitled each year within a specified period of earning it.

The following jurisdictions allow employees to postpone or waive their entitlement in a given year in certain situations (For other jurisdictions, contact the applicable employment standards board):

Canada Labour Code: Employees and employers may agree in writing that an employee will postpone or waive their vacation. The employer must still pay the employee vacation pay for that year within 10 months of the employee becoming entitled to it. 

Newfoundland and Labrador: Employers may cancel an employee’s already-approved vacation, but the employer must compensate the employee for reasonable expenses that he or she cannot recover.

Northwest Territories: In exceptional circumstances, employees may waive or postpone their vacation in a given year.

To do so:

• An employer and an employee may apply to the employment standards officer for permission. In the application, they must identify the exceptional circumstances. The application must also include a copy of the employee’s proposed waiver. If the waiver is approved, the employer must still pay the employee vacation pay no later than six months after the year of employment to which it applies or the date specified in the application, whichever comes first. 

• An employer and an employee may file a written agreement with the employment standards officer stating that they agree to postpone the employee’s vacation (or a part of it) for a specified year. The agreement must include a statement that both the employer and the employee agree to the postponement. The paid vacation is added to the following year’s entitlement.

• An employee may apply on his or her own to the employment standards officer for permission to postpone the vacation (or a part of it) to the following year if the employer will not agree to it. In the application, the employee must explain why this is necessary. The employee must also include a statement that he or she requested the postponement, but that the employer rejected it. If the application is approved, the employment standards office can require the employer to postpone the vacation to the following year of employment. 

Nova Scotia: Employees who work less than 90 per cent of the regular working hours in any continuous 12-month period may opt not to take a vacation leave. The employer must still pay the employee their vacation pay no later than one month after the 12-month period ends. Employees must request this option in writing; the employer cannot require it.

Nunavut: In exceptional circumstances, employees may waive or postpone their vacation in a given year.

To do so:

• An employer and an employee may apply to the labour standards officer for permission. In the application, they must identify the exceptional circumstances. The application must also include a copy of the employee’s proposed waiver. If the waiver is approved, the employer must still pay the employee vacation pay within 10 months after the year of employment to which it applies.  

• An employer and an employee may file a written agreement with the labour standards officer stating that they agree to postpone the employee’s vacation (or a part of it) for a specified year. 

• An employee may apply on his or her own to the labour standards officer for permission to have the vacation (or a part of it) postponed to the following year. In the application, the employee must explain why this is necessary.

Ontario: Employees may waive their entitlement to a vacation (or part of it) if the employer agrees and the director of employment standards approves it. Nevertheless, employers are still obligated to pay vacation pay. 

Prince Edward Island: Employees who work less than 90 per cent of the regular working hours in any continuous 12-month period may opt not to take vacation, but be paid vacation pay.  Employees who wish to do this must advise their employer in writing before the end of the 12-month period. Employers must still pay vacation pay no later than one month after the end of the 12-month period.

Quebec: Vacation entitlement may not be waived, unless there is a special provision in a collective agreement or decree allowing it. Another exception applies for employees who work for a business that closes for two weeks every year for an annual vacation and the employee is entitled to three weeks’ vacation. These employees may request that their employer waive their third week of vacation and pay them the vacation pay owing. 

Saskatchewan: The Labour Ministry requires employers who cancel or reschedule an employee’s vacation after having agreed to it, to refund the employees for all non-refundable deposits, penalties, and other pre-paid vacation expenses (for example: airfare or accommodation). To receive a refund, employees must provide receipts for the expenses.

Yukon: Employers and employees may enter into written agreements to waive their right to an annual vacation. Employers must still pay vacation pay within 10 months of the employees becoming entitled to the vacation. 

Note: Jurisdictions such as Manitoba, Ontario, and Quebec allow employees on a leave of absence permitted by labour standards law to postpone their vacation to a later date.

QUESTION: When calculating vacation pay for salaried employees, are employers allowed to pay the employees their regular pay period earnings for the vacation period?

ANSWER: Employers must be careful about doing this.

Labour standards legislation in all Canadian jurisdictions requires employers to pay employees a specified percentage of their earnings for vacation pay — generally four per cent or six per cent, depending on their length of employment.

Included earnings when calculating vacation pay may or may not be the same as the employees’ regular weekly pay.

Vacationable earnings may include payments such as call-in pay, overtime pay, commissions, shift premiums and statutory holiday pay.

As a result, the amount of vacation pay owing to an employee may be higher than the employee’s regular weekly wages.

The types of payments to include when calculating vacation pay vary from jurisdiction to jurisdiction.