Dentist employers should be aware of the vacation time and vacation pay entitlements that employees are owed under the Employment Standards Act, 2000 (ESA). A dentist’s employees are owed vacation time after a certain length of employment. Moreover, employers usually must payout earned vacation pay to their employees at the end of the employment relationship.
Dentists should note the distinction between vacation time and vacation pay entitlements under the ESA. Vacation time is the number of days of paid vacation that an employee is entitled to (e.g., two weeks), whereas vacation pay is the amount of payment that an employee is entitled to during their vacation time (e.g., four percent of gross wages).
For a discussion on recent changes to vacation pay period requirements, see this article.
What do you first need to know about ESA minimum standards and employment agreements?
The ESA provides minimum standards that set a floor for the employee vacation entitlements that must be included in the employment agreement. Employee vacation entitlements that are less that the ESA minimum standards are void. However, an employment agreement can provide for vacation entitlements that are greater than the ESA minimums. If the employment agreement contains vacation entitlements are greater than the minimums, then the terms of that agreement are a binding contract on the employee and employer.
Employers and employees should have their lawyer review employment contracts to determine whether it provides greater entitlements than the ESA minimums. This article will assume that the employment contract only contains vacation entitlements that match the ESA minimums.
Under Ontario law, must employees work for a minimum period before being eligible for paid vacation time?
Under the ESA minimum standards, employees are only entitled to vacation time if they are employed for at least one 12-month period known as a vacation entitlement year. The ESA applies to most employees and employers in Ontario with some exceptions including but not limited to police officers, airlines, post offices, and banks.
What are the ESA requirements for vacation pay and time?
Under the ESA minimums, employees who have been employed for less than 5 years are entitled to at least 2 weeks of vacation time after the after each completed vacation entitlement year (s. 33(1)(a)) at a rate of at least 4% of gross wages (s. 35.2(a)).
Employees who have been employed for 5 years or more are entitled to at least 3 weeks of vacation (s. 33(1)(b)) at a rate of at least 6% of gross wages (s. 35.2(b)).
Employers are only obliged to provide vacation pay after the employee has completed their first 12-month vacation entitlement year. Thus, employees who do not complete a full vacation entitlement year are not entitled to any vacation time under the minimum standards of the ESA. However, the terms of an employment agreement may provide for vacation time before the completion of a vacation entitlement year.
How is the vacation entitlement year calculated?
The vacation entitlement year can be calculated in two ways. First, the standard vacation entitlement year is a recurring 12-month period that begins on the first day of employment.
Second, an alternative vacation entitlement year is a recurring 12-month period that begins on another date chosen by the employer. When analternative vacation entitlement year is used, the period from the hire date until the start of the alterative vacation entitlement year is called a stub period (ESA, s. 1(1)). During the stub period, the employee is entitled to a pro-rated vacation time.
What absences from work are included in calculating the vacation entitlement year?
The vacation entitlement year includes time that the employee spends away from work due to layoff, sickness or injury, certain types of health or caregiver leaves, and certain other approved leaves. Section 33(2) states that both “active” and “inactive” employment are included in calculating the vacation entitlement year. However, if the employment contract is severed, rather than only suspended, then the employee loses their accrual of employment and must re-qualify for their vacation entitlement year.
For further discussion on whether employee time on parental leave is calculated toward their vacation entitlement year see this article.
What if an employee goes on vacation before the vacation entitlement year is completed?
Under the ESA, employees are only entitled to vacation time if they have completed at least one 12-month vacation entitlement year. However, an employment agreement may contain greater vacation benefits than the ESA minimums, which may allow for vacation time before completing a full vacation entitlement year.
Dentist employers should consult their lawyer to review the terms of their employment agreements to identify when their employees’ vacation entitlement year begins and ends.
What happens if an employment relationship ends after taking pre-minimum vacation time?
When employment ends (e.g., by the employee quitting or being terminated), the employee is entitled to the vacation pay that they have earned but not yet received. The employee is entitled to vacation pay equal to 4% of their wages in any 12-month period, excluding any vacation payments already made.
Although employees are not entitled to vacation time if they do not complete a full vacation entitlement year, vacation pay is still earned as they earn wages. Thus, employes are entitled to at least 4% of vacation pay for every hour of wages.
Employers must pay all outstanding vacation pay to the employee no later than the later of (a) 7 days after the employment ends, or (b) the next pay day.
Takeaways
Dentist employers should note that, under the ESA minimum standards, employees are owed vacation time after completing a full vacation entitlement year. However, an employment agreement may provide for vacation time before the completion of an entitlement year. Dentist employers should also note when they must payout earned vacation pay after the employment relationship ends.
Dentists should consult their legal team to ensure that their employment contracts are clear on the terms of their employee’s vacation time and vacation pay.
Thank you to Ephraim Barrera for his contribution to this article. The contents of this article are not to be construed as legal advice. Contact Emerge Law’s lawyers for legal assistance.