Employers often have questions about what to do with vacation when an employee is on a leave. Do they still earn vacation time? Do they still get vacation pay even if they aren’t getting paid? Vacation is one of the trickiest employment standards, but we will shed some light into its dark corners in this post!
The Right to Vacation
Under the Ontario Employment Standards Act (the ESA), employees are entitled to vacation both during periods of active and inactive employment. Employees are entitled to a minimum of two weeks of vacation per year if they have been employed for less than five years and three weeks per year after five years of employment. Vacation can be paid time off or additional pay. Employees who work part-time generally earn vacation pay on each paycheque, as opposed to paid time off.
A period of “inactive employment” is a period of time during which the employee is still employed but may not actually be working. Employees on leaves of various types would be considered inactively employed. The ESA sets out a variety of different leaves under Part XIV. The leaves set out the parameters under which an employee can take a leave and have their job held until their return. Generally, the leaves require a period of active employment before an employee is eligible, are only for a set amount of time and are unpaid. The most commonly used ESA leaves are pregnancy leave and parental leave. The ESA also provides job protection for things like organ donor leave, family caregiver leave, bereavement leave and reservist leave – just to name a few.
Earning Vacation While On Leave
While it may seem counterintuitive that an employee still earns vacation while they are on a leave – aren’t they already kind of on a vacation? – but that’s the way it is. However, while an employee who is inactively employed will always earn vacation time, they may not earn paid vacation time if their contract stipulates that paid vacation is earned through active service. Even where a contract contains this stipulation, an employee’s vacation entitlement (be it paid or unpaid or both) must never be less than the minimum ESA entitlement. Remember ESA vacation is earned through active AND inactive service. The Ontario Ministry of Labour provides some good examples of how this works in their Guide to the ESA, Your Guide to the Employment Standards Act.
Paid or Unpaid – Vacation Time and Vacation Pay
Whether an employee earns paid time off while on a leave will depend on the wording of the employment contract. Paid vacation is typically earned on paid time and not on unpaid time.
The ESA requires that an employee be paid (or earn) a percentage of their wages as vacation – 4% for 2 weeks and 6% for 3 weeks. For employees on unpaid leaves, they will typically not earn paid vacation time (or vacation pay) because they have not earned wages upon which they would earn paid vacation. However, employees on unpaid leaves will still earn vacation time as per their minimum ESA entitlement – it will just be unpaid. For example, if Mark takes an unpaid parental leave of 6 months, and his annual vacation entitlement is 2 weeks, he will earn one week of paid vacation (for the 6 months he worked and earned wages) and 1 week of unpaid vacation (for the 6 months he was on an unpaid leave).