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Q&A: Bill 148 increases vacation entitlements for all employees

vacation entitlementsIn this conference Q&A, we address the increases to vacation entitlements brought forth by Bill 148.

In partnership with Stringer LLP, First Reference Inc. recently hosted the 19th Annual Employment Law Conference on June 12, 2018, where we discussed the latest legal developments on topics including practical compliance strategies in light of Bill 148. While the law is clear in theory, its application tells many stories as employers and HR professionals deal in the practical world of differing employment dynamics.

We received a large amount of questions from conference attendants during the Q&A session. Though we could not answer them all during the conference, the First Reference Blog will be updated weekly to provide further clarity on this year’s hot topics based on the questions we received.

Q:

A conference attendee inquired about the practical implications of the increased vacation entitlements that came into effect on January 1, 2018. Her question was: Our standard vacation entitlement for a permanent salaried employee is 20 days. Some employees work various FTE [we presume that you mean “full-time equivalent”]. For an employee working 17.5 hours per week, they would receive half of the 20 days, which is 10 days. Do we need to top up their vacation to 15 days if they have five plus years of service?

A:

Previously, the Ontario Employment Standards Act (ESA) did not require vacation time and pay to increase with length of employment. All employees were statutorily entitled to two weeks of vacation per year at four percent vacation pay, regardless of how many years they continuously worked for the same employer.

However, effective January 1, 2018, the Fair Workplaces, Better Jobs Act, 2017 (Bill 148) updated the statutory minimum so that vacation time and pay increase with length of employment. This means that an employee, since January 1, 2018, is entitled in law to two weeks of vacation after each 12-month vacation entitlement year. Employees with five or more years of employment are entitled to three weeks of vacation time at six percent vacation pay. Ordinarily, a vacation entitlement year is a recurring 12-month period beginning on the date of hire.

The important thing here is that the Employment Standards Act does not differentiate between part-time or full-time employees, or between employees paid hourly or on a fixed salary—the vacation entitlement is the same under the law. What will be different is the calculation of the entitlement.

In the context of the above question, a workplace policy can offer a greater right or benefit than the statutory minimum and attribute the entitlement to employment status or hours worked, and calculate it in days or hours. But the employer must make sure that every employee still receives their statutory minimum entitlement under the Employment Standards Act.

To this effect, employers should pay special attention to wording choice whereby the ESA vacation entitlements are specifically expressed in weeks, not days. When converting weeks to days or hours, and basing vacation entitlement on hours worked, the employer must ensure that the policy at least offers equivalent entitlements as the statutory minimum under the ESA. As we don’t have further information regarding the context of the above question, the conference attendee must ensure the 10 days offered in the workplace policy equal the two weeks statutory minimum for every 12-month period of employment, and the proposed 15 days equal the three weeks statutory minimum the employee would be entitled to after 5 years or more of employment. Otherwise, the employer may be exposed to an unpaid vacation claim.

It is always recommended to abide by the language of the law and to just offer a percentage of gross wages (4% or 6%) depending on the length of employment as vacation pay.

Please Note: This article is prepared for information purposes only; it is not legal advice. Consult a lawyer before acting on it or to obtain legal advice or a legal opinion.

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Ava Z Moradi, JD

Editor at First Reference
Ava Moradi, JD, received a Juris Doctor (J.D.) at the University of Windsor, Faculty of Law in 2014. She is a writer, researcher and editor in employment and labour law at First Reference. She is one of the content editors for The Human Resources Advisor, Ontario, Western and Atlantic editions and a contributor to First Reference Talks and HRinfodesk.
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2 thoughts on “Q&A: Bill 148 increases vacation entitlements for all employees
  • To be entitled to the six percent vacation pay and three weeks vacation time, the employee must reach the five-year period of employment threshold. The employee’s entitlement increases to six per cent vacation pay on all wages earned in the vacation entitlement period. As a result, the employee is entitled to an additional two per cent of the wages earned in the vacation entitlement period to the date the five-year period of employment threshold was reached. In addition, the employee is entitled to be paid six per cent vacation pay on the wages earned from that date forward.

  • Jason S. says:

    As of Jan 1, 2018, many of our employees who have been with us for more than 5 years were suddenly entitled to 3 weeks of vacation; however, they only started accruing the extra 2% vacation pay at that time. So for someone used to taking vacation in March, there would not be a full 3 weeks of vacation pay available. I understand that we are required to “top up” or “back-pay” that extra 2% back to the beginning of their vacation entitlement year – is this correct? Please clarify as I have a feeling many small business owners AND their employees are not aware of this.

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