Not long ago a dentist client said the following to me:
“I heard from a friend that I don’t have to give employees vacation pay if I terminate them before they take their vacation“
There are a lot of these myths and tall tales floating around out there about what is legal and illegal when it comes to employee vacation time and pay. It is these types of “I heard from a friend” stories that have inspired me to demystify some of the common vacation time and pay myths out there.
1. When Does Vacation Time Start?
According to the Employment Standards Act, 2000 (the “ESA“), Ontario employees are not entitled to vacation time or pay until such time as they have worked for 12 consecutive months. This, of course is the minimum standard and employers can (and often do) choose to give their employees 2 weeks off and 4% pay in the first year they are employed.
WHAT DOES THIS MEAN FOR ME?
You do not need to give a new employee their 2 weeks of vacation until the end of their first year of work.
2. Can I Dictate When Employees Take Vacation?
Yes. The ESA specifically states that “the employer shall determine when an employee shall take his or her vacation…” Furthermore, the ESA says that employers should give their employees 2 consecutive weeks off OR two blocks of 1 consecutive week – unless the employee consents to take their vacation otherwise (i.e. a day here and a day there)
WHAT DOES THIS MEAN FOR ME?
If you wish to shut down the office for one week in the winter (usually over the holidays) and one week in the summer (because it is usually slow around this time), then you can do so without violating any laws. Just make sure you give your employees as much advance notice as possible before doing so, and make sure this will not violate your office policy.
3. If Unused, Does Vacation Time Accrue Year to Year?
No. The ESA says that the employee’s vacation should be “completed no later than 10 months after the end of the vacation entitlement year for which it is given”. In plain language, this means that if the employee does not use their vacation within 10 months after the end of the last vacation year, they are no longer entitled to it.
WHAT DOES THIS MEAN FOR ME?
Vacation does not have to accrue year to year – and in the end allow an employee to take 3 months off in a year. If the employee does not take their vacation within 10 months of the last vacation period, then they are no longer entitled to take it. Don’t fall into a trap though, you still must give an employee their vacation pay even if their right to take the vacation has passed.
4. Do I Have to Pay Unused Vacation Pay Upon Termination?
Yes. Yes. Yes. Because every employer is required by law to give each employee 2 weeks of vacation paid at 4%, it is a non-negotiable benefit which accrues to the employee while they are employed with you. When the employee is terminated without cause, then they are still entitled to whatever vacation pay they have accrued up to the time of termination.
WHAT DOES THIS MEAN FOR ME?
Terminating an employee without cause means that, along with termination pay, you must also pay them any accrued vacation pay. Different rules apply if you give the employee working notice or if you fire them for cause. Because termination is a complicated matter, you should speak with a lawyer before terminating any employee.
5. Do I Have to Pay Vacation Pay to Employees on a Leave of Absence?
Yes. According to the ESA, “both active employment and inactive employment shall be included” for the purposes of accruing vacation. What this means is that leaves of absence of all varieties (i.e. parental leave, pregnancy leave, bereavement leave, etc.) count as time employed for the purposes of accruing vacation.
WHAT DOES THIS MEAN FOR ME?
That employee that went on maternity leave is still entitled to vacation pay even though she is gone… And that employee that left for 3 months to take care of her sick mother is also entitled to accrued vacation pay for that time. Be sure to pay these accordingly because otherwise you will be in violation of the employment laws of Ontario.
For further guidance and information on employee vacation entitlements, you can contact our employment law team at any time. We are your legal dental team.
