To Pay Vacation Pay, Or Not Pay Vacation Pay: That Is The Question

We are often asked by employers to provide direction about payment of vacation pay to departing employees. What may seem like a simple question, however, can in fact be quite complex.

Legal Framework

When an employee is dismissed – whether with or without just cause – the employer must pay the employee his or her accrued wages to the date of termination, along with his or her accrued but unpaid vacation pay, in accordance with applicable employment standards legislation.¹

While the rules above seem relatively straightforward, the issue is complicated in the case of an employee who is dismissed without cause and given pay in lieu of notice. The question then becomes whether or not the employee continues to accrue vacation pay during the applicable period of notice (whether under statute, contract or common law). On this point, the law is somewhat divided.