If you haven’t seen Michael Moore’s documentary “Where to Invade Next” yet, suffice it to say that you don’t know how much you want to work in Italy. Their employment laws are extremely generous with vacations and leaves of absence, and there seems to be widespread cultural support for work-life balance. What’s more, some of its most vociferous supporters are employers! This speaks to a completely different, human-oriented approach to work, quite unlike the work-till-you-drop attitude underpinning Canadian work-culture.

That got me curious; how does Canada – Ontario specifically – stack up in terms of vacations? We certainly don’t drink as deeply from the well that is the “free market school of economics” as our southern neighbours, but neither are we as radical in our social policies as Italy. Before I could make any comparisons, I dug around in Ontario’s Employment Standards Act (ESA) to make sense of it all.

 

Vacation Time

Observe the timeline above for a hypothetical employee we’re going to call Pluto.

 

When is Pluto entitled to a vacation? Pluto starts his new job at Hound Co. on January 1, 2017 and has to complete one full entitlement year to get any vacation time (ESA, s. 33(1)). In his case, that means he has to remain with his employer until January 1, 2018. Going forward, let’s assume that today is that day.

 

What do you mean by “remain with his employer”? Good catch. For the purposes of earning vacation time, both active and inactive employment (e.g. being on statutory leave, illness) count toward the completion of an entitlement year (ESA, s. 33(2)). So even if Pluto took parental leave in the middle of the year, his entitlement date would not get postponed. He was still with the employer, even if he wasn’t actually working for them in that period, and still earns his vacation time on January 1, 2018.

 

How much vacation time does Pluto get? Since Pluto has worked for less than five years for his employer, he will get two weeks of vacation (ESA, s. 33(1)(a)). His manager, Fido, has been with the company since January 1, 2013 (at least five years) and is therefore entitled to three weeks of vacation (ESA, s. 33(1)(b)).

 

When can Pluto go on vacation? The exact timing of the vacation is up to the employer, provided some conditions are met (ESA, s. 35). The first is that the employer has to schedule Pluto’s vacation time within ten months of Pluto earning the vacation. For Pluto, this corresponds to the blue band on the timeline above, which marks the ten month period between January 1 and November 1, 2018. The second is that the employer cannot schedule the vacation in less than one week intervals unless the employer and employee enter an agreement to vary. However, they can schedule vacation time for Pluto, and his manager Fido, as follows:

Pluto – Employee < 5 years

  • 2 x 1 week vacations
  • 1 x 2 week vacation

Fido – Employee ≥ 5 years

    • 3 x 1 week vacations
    • 1 x 2 week vacation; 1 x 1 week vacation
    • 1 x 3 week vacation

 

Can Pluto’s unused vacation time carry over into next year? Employers are under no statutory obligation to carry unused vacation time into the next year. By default, the statute imposes a “use it or lose it” policy but employers are, as always, free to exceed the statutory minimums and offer a carry-over policy. Many employers offer a carry-over of a limited amount of vacation time.

 

Vacation Pay

 

How can Pluto calculate his vacation pay? Vacation pay, like vacation time, varies with length of employment. Pluto would be entitled to at least 4% of his gross wages for the 12-month period in which the vacation is taken. This goes up to 6% for Fido (ESA, s. 35.2). For full-time employees 2% works out to roughly one week’s wages so you can see the logic here (however, this can be a lot more or a lot less than what an employee normally earns if they work irregular hours).

 

When does Pluto get his vacation pay? This amount should be paid out lump-sum before the employee commences their vacation (ESA, s. 36(1)) but the legislation also allows for alternative methods. If Pluto is paid by direct deposit, vacation pay can be paid on or before the payday for the period in which the vacation falls. This is also the case if Pluto and his employer have an agreement to vary, permitting vacations smaller than a one week interval, or if Pluto and his employer mutually agree that the payment will be made on some other date. Another arrangement is that Pluto and his employer could have the 4% accrue on each pay cheque.

 

Will leaves of absence and other such circumstances affect vacation pay? Yes. While periods of inactive employment do not count against your entitlement to vacation time, they will affect your gross wages in the 12 month period, and therefore also your vacation pay.

 

What happens if a vacation coincides with a public holiday? Pluto will get a substitute day off (ESA, s. 29(1)) and still receive public holiday pay (ESA, s. 24(1.1)). The substitute day off must be within three months of the public holiday or within twelve months if both parties agree (ESA, s. 27(3)). From a policy perspective, Pluto is entitled to all of his rights under the ESA so his right to vacation cannot be offset against his right to time off for a public holiday.

 

Are there any exceptions to any of these laws? Plenty. Some industries and classes of workers are not subject to every provision in the ESA. Every exception is listed in O.Reg 285/01, but the Ministry of Labour’s unofficial Special Rule Tool summarizes the exceptions in easy to read language (and with much better formatting).

 

Takeaways:

      • Employees earn vacation time for being in an employment relationship for a full year irrespective of whether or not they were actively employed in that time
      • Record all the requisite information in Part VI –  the calculations for vacation pay and holiday pay draw upon it
      • Always check for exceptions!

Author: Sahil Kanaya

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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