At termination, can companies compensate vacation days with vacation pay at less than fair value?

Question

Being let go, I have 15 days vacation accrued. They want to pay:

salary × 15 days / 365 days = 4.1% of salary

But suppose someone accrues 260 days of vacation, this corresponds to 52 weeks of 5 business days, so he could take off a whole year. In which case, his 260 days translates into:

salary × 260 days / 365 days = 71.2% of salary

So basically we're being compensated at 71.2%.

First question: Is this legal? (Ontario, Canada)

Second question: If not, can someone point to a reference where it indicates vacation days must be paid at par?

I tried checking on-line at the ontario.ca and other places, and none of them have a similar case of using vacation days, it's either weeks, or percent of salary, that kind of thing, so can't compare.

Answer 1

I'm not a lawyer. However, I did find some interesting parts at Your Guide to the Employment Standards Act - Vacation. Quoting:

Vacation pay

Employees must receive a minimum of four per cent of the gross "wages" (excluding vacation pay) they earned in the 12 month vacation entitlement year or stub period for which the vacation is being given. [...]

If an employee's contract or collective agreement provides a better vacation benefit than the minimum required, the employee may be entitled to a higher percentage of his or her gross earnings for vacation pay. For example, an employee might be entitled under his or her contract to three weeks' vacation, with six per cent of gross earnings for vacation pay. [emphasis mine]

Essentially, 15 days' vacation is 3 weeks vacation, and at two per cent per week of vacation, the entitlement would be six per cent of gross earnings under Ontario's Employment Standards Act. The example is clear. And later, on at the same page:

When employment ends

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 [emphasis mine]. In some cases this would include vacation pay earned during a previous vacation entitlement year or stub period as well as the vacation pay earned during the current vacation entitlement year or stub period. Vacation pay is also payable on termination pay but not on severance pay.

Consider:

• If you'd have been able to use your accrued 15 vacation days while still employed and in doing so be paid your salary equivalent for 3 full weeks (i.e. no need for using vacation days to cover Saturdays and Sundays when on vacation, right?), then:
• 3 weeks of salary would be the vacation pay already earned but that was not paid out (because you didn't yet use the vacation time.) And so:
• On termination, the employer should pay the amount earned and not yet paid out — no less. Consider: "has earned" (from the quoted part above) imples the value as at when it was earned. What you have already earned and your employer still owes you shouldn't be subject to later revision and reduction at their whim.

However, IANAL. If you've been terminated, it may be a fantastic idea to consult with a lawyer about seeking a better termination package. One last thing I'll point out from the same page is the "Requesting statements of vacation records" section. Having those records may be helpful if you need to talk to a lawyer about this issue.