Accrued Vacation and Reasonable Notice: Helping Sustain Your Employees on Termination

Lawyer Trevor Thomas, Contributor.

respectThere are several things an employer needs to be mindful of when determining a dismissed employee’s reasonable notice entitlements – many of which we’ve covered elsewhere in this blog (see examples here, here, and here). As complex as the calculation might seem at first glance, the guiding principle for employers can be summed up simply as: Give the employee what she deserves.

A good example of the application of this principle is how employers are expected to treat a fired employee’s accrued vacation time. As practical (and cost-efficient) as it might seem to roll an employee’s unused vacation days into her notice period, both the law and the rules of fairness prevent you from doing so.

The BC Employment Standards Branch and the BC Supreme Court both agree that employers may not include an ex-employee’s vacation time in his notice period. As the Court explained in Kothlow v. West Coast Savings, [1987] B.C.J. No. 498:

An annual vacation is not a gift by an employer to an employee, but a right earned by the employee by reason of his service in his employment before he commences the vacation. An employer cannot rob the employee of that right by including the period of the vacation, or any part thereof, within the period of notice of termination.

Since this 1987 decision, the courts in BC have confirmed that employers should not be combining owed vacation days or pay with an employee’s notice or severance entitlements on termination.  Because an employee has a right to both of these forms of compensation, they should be kept separate.

The law in this area reflects and encourages the principles of something we call “Sustainable Employment”. In our view, it is possible for employers to treat employees with respect and fairness even when ending the employment relationship. By ensuring that an employee receives all the compensation she is legally entitled to on termination, you can actually provide her with both the financial and emotional support that will help sustain her through the post-employment transition period.

Have questions about a dismissal? Contact us!

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