Vacation time and vacation pay

By Stuart Rudner 

In January 2012, I posted a discussion on this blog entitled 10 vacation time and pay myths. That remains one of the most popular blog posts I have ever written, and continues to generate questions to this day.

In a typical week, I receive two or three questions referencing the post. Obviously, vacation time and vacation pay, and the laws regulating them, have created a lot of confusion. 

To begin with, it is important to understand that while employees are entitled to both vacation time and vacation pay, these two concepts, while clearly related, are not exactly the same. For example, employees are not legislatively entitled to vacation time during their first year of employment (although it is accruing), but they are entitled to vacation pay. Similarly, vacation time can be foregone in some cases, but vacation pay cannot. 

There are some issues that come up almost every week. For example, scheduling is a big issue. As I set out in the original post, employers are entitled to determine when employees take their vacation, though there are deadlines by which vacation time must be provided (in Ontario, it is 10 months after the end of the vacation year or period).

A failure to ensure employees take their statutory vacation time within the deadlines is a breach of the employment standards legislation on the part of the employer. 

“Use it or lose it policies” is another issue that arises frequently. These can be imposed for vacation time beyond the statutory minimum amount. However, it is important that the contractual agreement be clear and unambiguous, and there be no suggestion the agreement between the parties, either written or based on past practice, was that the employee could accrue vacation time and take it later. Otherwise, employers end up with employees who have accumulated vast amounts of vacation time over the years. 

With respect to the timing of vacation pay, which is another frequently asked question, there are various options provided by legislation. However, vacation pay cannot be withheld until the end of the employment relationship, though some employers apparently have attempted to do so. 

Speaking of the end of the employment relationship, it is important to note that any accumulated vacation time or vacation pay must be paid out when the relationship ends, for whatever reason. Furthermore, while vacation pay does not accrue during the common law period of notice, it does accrue during the statutory notice period. 

Another issue that often arises is what happens when an employee takes vacation, during which time a statutory holiday arises. Simply put, that day will not count as a vacation day, unless the parties agree that the employee will take another day off as a substitute holiday. 

Whenever these issues arise, I encourage employees to check with their provincial ministry of mabour first. Many of the ministries, including Ontario, have fairly helpful websites that can be used as an initial resource. If the matter cannot be addressed satisfactorily, then it is always wise to consult with an employment lawyer. However, it can often be more cost-effective to deal with a ministry first. 

Employers have more to lose as breaches of the employment standards legislation can result in penalties and fines. For that reason, I encourage all employers to work regularly with an employment lawyer to ensure they are not inadvertently breaching legislation and exposing themselves to liability.