Vacation Accrual During a Leave of Absence

Employees who take the full one year maternity leave (known as pregnancy and parental leave) under the unpaid leaves of absence provided by Ontario’s Employment Standards Act, 2000 (“ESA”) are in most cases required under the ESA to take the vacation time accumulated during the one year leave of absence immediately following the expiry of the maternity leave. In other words, if an employee has accumulated two weeks of vacation during the one year leave of absence, she must then take those two weeks upon expiry of the one year leave. Those two weeks vacation are unpaid unless she has an employment contract that provides otherwise.

The ESA distinguishes between entitlement to vacation time and vacation pay.

Section 33 of the ESA provides that an employer must give an employee at least 2 weeks vacation and that the vacation is calculated on both active and inactive employment.

Section 35 of the ESA provides that the employer shall determine when the employee will take her vacation.

Section 35.2 of the ESA provides that the employer shall pay vacation pay to an employee entitled to vacation time equal to a least 4% of wages earned during the period. Therefore, during inactive employment no wages are earned, so employee is not entitled to vacation pay – but still remains entitled to vacation time under section 33.

Some difficulties can arise regarding inactive employment (leaves of absence such as pregnancy/maternity leaves) when an employment contract states something other than what the ESA provides as follows:

Contract Terms

Vacation Time Earned

Vacation Pay Earned

Employee will receive 4% vacation pay based on hours worked.

Yes

No

Employee will earn 2 weeks of paid vacation on an annual basis.

Yes

Yes

 

Section 51.1(1) of the ESA addresses the situation where a conflict arises between the right to take vacation and the right to take a leave of absence where vacation time is accrued on inactive employment. Such a conflict can arise where an employment contract restricts or forbids an employee to defer vacation entitlements which would result in an employee on a leave of absence to have to take either less than their full ESA leave entitlement or give up some or all of their vacation time or vacation pay entitlement under an employment contract.

Section 51.1 of the ESA provides an employee on an ESA leave of absence with the option of deferring taking the vacation until the leave is over, or to a later date agreed upon in writing by the employer and employee.

Section 51.1(3) provides that the employee can decide to forego vacation time.

Section 51.1(2) of the ESA states that where the employee is on an ESA leave during the time when her accrued vacation must be completed, the uncompleted part of the vacation shall be completed immediately after the leave expires or if the employer and employee agree to a later date, then beginning on that later date.

For example, an employment contract provides an employee with 3 weeks of vacation per year. The employment policy is that the one week over the ESA minimum standards must be used by December 31 of each year. An employee is on a combined pregnancy and parental leave from July 1, 2016, to July 1, 2017. She had not taken the extra week of vacation before going on leave. The employee is required under section 51.1(2) to take the 3 weeks unpaid vacation time immediately after the leave expires on July 1, 2017. Alternatively, the employee and her employer could agree in writing that:

  1. She take the 4 weeks unpaid accrued vacation at a later date [s.51.1(2)].

      2.  She forgo the accrued vacation time and receive vacation pay rather than completing the vacation time under section 51.1 [s.51.1(3)].

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Christina J. Wallis is a Partner lawyer practising civil litigation with a focus in Employment Law at Dale & Lessmann LLP, Toronto, Ontario, Canada, a full service business law firm. To speak to Christina please call 416-369-7832 or send an email message to her at mailto:cwallis@dalelessmann.com.