Summer is here, and the living is easy? When it comes to determining employee rights and employer obligations with respect to summer vacations, perhaps not. The legally mandated guidelines are ever-changing, and both employers and employees should be mindful of the rules with respect to vacation time and pay entitlements.

Vacation Time

Under Ontario law, broadly speaking, employees with five years or less of employment are entitled to 2 weeks of vacation during each 12 month employment period. As of the enaction of Bill 148 on January 1, 2018, employees with 5 years or more became entitled to 3 weeks annual vacation. While the more recent Bill 47 reversed many of the changes to the Employment Standards Act enacted under Bill 148, the rules on vacation pay remain in effect.

The usual 12-month cycle for vacation calculation is a revolving 12 month period from the date of hire. The employer may, however, determine its own time period in which case there may be a stub period resulting in a prorated entitlement prior to the commencement of the employer’s time period.

The vacation period must be taken within 10 months of the completion of the year or the initial stub period, however, the company does the right to ensure that the vacation time is scheduled and taken within this period.

Vacation Pay

Vacation pay for employees with less than 5 years’ service must be 4% of gross wages earned in the vacation year. For persons with a longer employment history, the amount raises to 6%. These are the minimum sums due. The parties may agree to greater vacation entitlements which will adjust the mathematics accordingly.

A person who does not complete the full vacation year is not entitled to time off, but they still must be paid the vacation pay gross-up.

Some industries are exempt; for more information on this, see the Ministry of Labour website.

Incentive Pay

Many people are unaware that vacation pay is also owed on bonuses or incentive payments. The bonus plan may have words to the effect that the sum due includes vacation pay, in which case these words may prevail. This issue may lead to greater consequences than the vacation pay sum itself. An agreement which defines a sum due on termination may run afoul of this provision and lead to the unenforceability of the defined severance term and expose the employer to a far greater common law claim.

Employers’ Guide

This is a tricky issue, particularly when the legislated employment standards are regularly changing and evolving. Employers would be wise to have their vacation policies audited on a regular basis.

Employees’ Claims

Vacation pay claims may be quite serious. The limitation period also must be considered, which means advice should be obtained before claims are evaporated by the passing of time. Get advice.

Get Advice Before You Act

If you have questions about this issue or any employment question, contact the offices of Toronto employment and labour lawyers Mallins Law. We regularly advise employees and employers on legal workplace issues. Contact us online or by phone at 647-792-0310 to schedule a consultation.