This webinar addressed common questions and myths regarding vacation time and pay. It covered topics such as who determines when vacation is taken, accrual of time during leaves of absence, pay calculations, and entitlements upon termination of employment. Key points included that there is no statutory right to vacation in the first year but time accrues; employers schedule vacation but it must be given in one-week blocks unless agreed otherwise; and vacation pay is based on various earnings not just salary. The webinar provided clarity on vacation laws and highlighted some surprises around related requirements and entitlements.

1. HRPA Webinar
October 28, 2015
Presented by
Stuart E. Rudner
Vacation Time and Pay
Myths and Misconceptions

2. Common Questions
 Who gets to decide when someone takes vacation?
 What happens if you don’t take all of your vacation time?
 Does vacation still accrue if you are on leave?
 What if there is a statutory holiday in the middle of your
vacation?
 How do you calculate vacation pay?
 What if your employment ends before you use all of your
accrued vacation?
 Do “contractors” get vacation?
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3. Overview
 Key Terms
 Vacation Time
– Calculating
– Scheduling
– Accruing or Foregoing
 Vacation Pay
– Calculations
– Timing Options
 Using Contracts
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4. Vacation Entitlement
 Employees earn minimum of two weeks of
vacation time upon completion of every 12-
month vacation entitlement year
 entitled to vacation time 12 months following
date of hire and after each 12-month period
thereafter
– Unless contract provides better
 ESA does not provide for increases to vacation
time entitlement based on length of employment
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5. Key Terms
 Vacation entitlement year: the 12-month
period over which employees earn
vacation
 Standard vacation entitlement year: a
recurring 12-month period beginning on
the date of hire
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6.  Alternative vacation entitlement year:
recurring 12-month period chosen by
employer that begins on date other than
employee’s date of hire
 Stub period: Period between date of hire
and beginning of first alternative vacation
entitlement year
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7. Example
 Employee hired September 1
 Org uses calendar year for vacation entitlement
 Stub period is September 1 to December 31 (4
months)
 Calculation of vacation entitlement for stub
period: 2 weeks × R (ratio of stub period to 12
months) where R = 4 months/12 months
 2 weeks × 4/12 = 2/3 of a week.
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8.  Vacation entitlement year and stub period include
– layoff
– sickness or injury
– pregnancy, parental, personal emergency, family
caregiver, family medical, critically ill child care,
organ donor, reservist, or crime-related child
death or disappearance leaves
– any other approved leaves (i.e. where there is no
break in the employment relationship)
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9. Scheduling
 Vacation time earned in completed vacation
entitlement year or stub period must be taken
within 10 months of completion
 Employer has the right to schedule vacation as
 Employer has obligation to ensure vacation time
is scheduled and taken before end of ten-month
period
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10.  Vacation time earned must be scheduled in a
two week block or two one-week blocks
 unless employee makes written request and
employer agrees in writing to schedule the
vacation in shorter periods
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11. Foregoing vacation?
 Can’t just ignore vacation entitlement
 Employer can be liable for breach of ESA
 Employee can waive some or all earned vacation
time with employer's written agreement and
approval of the Director of Employment
Standards
 Employees may give up vacation time, but not
the right to vacation pay
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12.  Vacation time beyond ESA minimum can
be foregone
 Depends on contract / policy
 Need clear rules and procedures
 Or risk massive liability for accrued
vacation
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13. Public Holiday during vacation
Employee is entitled to one of the following:
 Substitute day off with public holiday pay
– must be taken within 3 months of public holiday
or within 12 months; or
 public holiday pay for that day without
substitute day off work
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14. Vacation Time vs Vacation Pay
 Separate under ESA (Ontario)
 No vacation time in first year of
employment
 But vacation pay applies right away
 You can pay while employee takes
vacation but not automatic
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15. When to pay
 Vacation pay must be paid to an employee in a
lump sum sometime before vacation time,
except:
1. When the vacation time is being taken in
periods of less than one week,
 the employee must be paid vacation pay on
or before pay day for period in which the
vacation falls
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16. 2. When the employee has agreed that vacation
pay will be paid on each pay cheque as it
accrues
3. At any time agreed to by the employee
4. If the employer pays the employee his or her
wages by direct deposit
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17. Calculating Vacation Pay
 4% is minimum based on 2 weeks vacation
entitlement – 2% per year
 "wages" on which vacation pay is calculated include
– regular earnings, including commissions
– bonuses and gifts that are non-discretionary or
are related to hours of work
– overtime pay
– public holiday pay
– termination pay
– allowances for room and board
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18.  But do not include:
– vacation pay paid out or earned but not yet paid
– tips and gratuities
– discretionary bonuses and gifts that are not
related to hours of work, production or efficiency
(e.g. a Christmas bonus unrelated to
performance)
– expenses and traveling allowances
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19. – living allowances
– contributions made by an employer to a
benefit plan and payments from a benefit plan
(e.g. sick pay) that an employee is entitled to;
– federal employment insurance benefits
– severance pay
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20. Termination of Employment
 When employment ends (for example,
when an employee quits or his or her
employment is terminated), an employee
is entitled to be paid the vacation pay that
she has earned and that has not yet been
paid out
 Vacation pay applies to statutory
termination pay
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21. Employment Agreements
 Vacation entitlement
 Scheduling
 Accrual or “use it or lose it”
 Do it properly
– Before verbal agreement
– With consideration
– Independent legal advice
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22. Surprised?
 There is no statutory entitlement to vacation time in
the first year of employment, but it does accrue so
vacation can be taken after one year of employment
 Employers are entitled to choose when employees
take their vacation time
 By default, vacation must be given in one-week
increments, unless the employee agrees in writing
 You cannot “waive” statutory vacation without
approval written agreement and approval of Director
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23.  Vacation entitlement does not have to increase with
seniority
 If an employee is on vacation when a statutory holiday
arises, it does not count as a vacation day
 Vacation pay is based upon “wages,” which are defined
to include more than just base salary or hourly wages
 Most leaves of absence count as time employed when it
comes to accruing vacation time
 True contractors do not enjoy the protection of
employment standards legislation, which includes the
right to vacation
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Stuart E. Rudner
srudner@rudnermacdonald.com
Toronto: 416-640-6402
York Region: 905-530-2484
www.rudnermacdonald.com
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