Ontario Labour Relations Board
[1999] OLRB REP. SEPTEMBER/OCTOBER 927
3133-98-ES; 3202-98-ES Irene Quirk, Applicant v. Allstate Insurance Company of Canada and Ministry of Labour, Responding Parties; Allstate Insurance Company of Canada, Applicant v. Desiree Grabarczyk et al and Ministry of Labour, Responding Parties
BEFORE: Gail Misra, Vice-Chair.
APPEARANCES: Catherine Peters, Tricia Biglow, and Seann McAleese for Allstate Insurance Company of Canada; Sari Garner and a group of employees for Desiree Grabarczyk et al and Irene Quirk; Brian Fukuzawa and Joe Boeswald for the Ministry of Labour
DECISION OF THE BOARD; December 23, 1999
1Both of these applications seek review of the decisions of an Employment Standards Officer. They are made pursuant to section 68 of the Employment Standards Act (the "Act"). Ms. Quirk is appealing the Officer's decision that Allstate Insurance Company of Canada ("Allstate" or the "employer") does not owe her any vacation pay for the period following December 1, 1996. She claims that she is owed $2,088.90 for 12 days of vacation which were due to her. Allstate is appealing the Officer's issuance of an Order to Pay in EPB File No. 41006460 in the amount of $43,863.23 for vacation pay due to its employees who took pregnancy and/or parental leave after December 1, 1996 and up to January 22, 1998, the date of the complaint to the Employment Standards Branch. It is Allstate's position that employees who avail themselves of their statutory right to take pregnancy and/or parental leave accrue vacation time, but because they are on unpaid leaves of absence, they do not have any right to receive vacation pay for that time accrued.
2A large group of the employees attended at the proceeding. In order to deal with the group in an orderly manner, the employees chose a spokesperson, Ms. Garner, to represent their interests at the hearing. Ms. Quirk's situation is different from that of the rest of the employees, as has already been outlined above. However, for the purposes of this decision, Ms. Quirk joined the rest of the employees affected. All of the parties agreed to proceed first with the legal issue of whether the Act supports the Officer's finding of liability for vacation pay. Following the issuance of a decision regarding this question the parties will consider whether a hearing is necessary to address any other issues that arise out of these two applications.
3The relevant sections of the Act are:
- (1) An employment standard shall be deemed a minimum requirement only.
(2) A right, benefit, term or condition of employment under a contract, oral or written, express or implied, or under any other Act or any schedule, order or regulation made thereunder that provides in favour of an employee a higher remuneration in money, a greater right or benefit or lesser hours of work than the requirement imposed by an employment standard shall prevail over an employment standard.
- (1) Every employer shall give a vacation of at least two weeks to each employee upon the completion of each 12 months of employment, whether or not the employment was active employment.
(2) An employer shall pay vacation pay to an employee entitled to a vacation under subsection (1).
(3) The vacation pay must be not less than 4 per cent of the wages (excluding vacation pay) earned by the employee during the 12 months for which the vacation is given.
- (1) During pregnancy leave or parental leave, an employee continues to participate in each type of benefit plan described in subsection (2) that is related to his or her employment unless he or she elects in writing not to do so.
(2) For the purpose of subsection (1), the types of plans are pension plans, life insurance plans, accidental death plans, extended health plans, dental plans and any other types of benefit plans that are prescribed.
(3) During an employee's pregnancy leave or parental leave, the employer shall continue to make the employer's contributions for any plan described in subsection (2) unless the employee gives the employer a written notice that the employee does not intend to pay the employee's contributions, if any.
(4) The period of an employee's pregnancy leave or parental leave is included in any calculation of his or her length of employment (whether or not it is active employment), length of service (whether or not it is active service) or seniority, for the purpose of determining whether he or she has a right under a contract of employment.
(5) The period of an employee's pregnancy leave or parental leave is not included when determining whether the employee has completed any probationary period of employment.
- An employer shall not intimidate, discipline, suspend, lay off, dismiss or impose a penalty on an employee because the employee is or will become eligible to take, intends to take or takes pregnancy leave or parental leave.
4Since Allstate has premised its argument, in part, on the difference between the language of section 28 prior to December 1, 1996 and the language following amendments that came into force on December 1, 1996, it would be helpful to reproduce the previous language here. It is as follows:
- (1) Every employer shall give to each employee a vacation with pay of at least two weeks upon the completion of each twelve months of employment.
(2) The amount of pay for such vacation shall be not less than an amount equal to 4 per cent of the wages of the employee in the twelve months of employment for which the vacation is given and in calculating wages no account shall be taken of any vacation pay previously paid.
5As of December 1, 1996 changes were also made to some portions of section 42. Subsections (1), (2), and (3) of section 42 remained the same. However, subsection (4) was removed and the new provisions outlined in paragraph 3 above were added. Prior to December 1, 1996 Section 42(4) read as follows:
- (4) Seniority continues to accrue during pregnancy leave or parental leave.
6There is no dispute about the facts underlying these cases. Allstate has a vacation policy that was last updated on August 24, 1992. The Allstate employees affected in these cases receive two weeks of vacation (10 days) in their first two years of employment. In the third year of employment vacation entitlement increases to three weeks per year (15 days); in the tenth year of employment it increases again to four weeks of vacation per year (20 days); finally, in the 20th year of employment vacation entitlement goes to five weeks per year (25 days). Pursuant to that policy employees hired before December 31, 1989 and after that date are treated slightly differently.
7For those hired before December 31, 1989 vacation entitlement is accrued from anniversary date to anniversary date for each full anniversary month worked. Only at the end of each month worked is the employee considered entitled to the vacation time earned that month. Earned vacation must be taken prior to December 31 of the year in which the vacation is accrued. While this is the official policy, in practice since 1992 Allstate has permitted employees to take their full vacation entitlement at any time during the year, and has not required the passage of the anniversary date before an employee would have access to increased vacation entitlement. Therefore, as will become clear in the following paragraph, the pre- and post-1990 employees generally are treated in the same manner.
8Employees hired on January 1, 1990 or later accrue vacation on a monthly basis, but can take their entire vacation entitlement at any time in the calendar year in which it is going to be earned. In the first year of employment the accrual takes place month to month from the date of hire. In the second year the date of hire becomes immaterial as the accrual of vacation simply begins from January 1 and goes by calendar month to month. Hence, in a year in which an employee may be eligible for three weeks of vacation, even if that employee had a September date of hire, as of January of that year the employee is entitled to take three weeks of vacation. For the purposes of vacation entitlement, the anniversary date becomes irrelevant after the first year of employment. In the event that an employee takes vacation time but leaves Allstate before that vacation is actually earned, the employer will not seek to recover the overpayment from the employee for the unearned vacation time taken.
9Employees who take maternity or parental leave accrue vacation while on leave as if they had been at work. However, the employer has taken the position that since the leaves are unpaid, the vacation time accrued is also unpaid time if it is taken. Persons taking any other type of unpaid leave do not accrue vacation time. The employer therefore claims that there is a benefit to those taking maternity or parental leave because they have the privilege of accumulating unpaid vacation time.
10It is noteworthy that in a year in which a person hired before December 31, 1989 takes a pregnancy or parental leave, s/he is treated differently than are persons hired from January 1990 on. The pre-1990 employee's vacation entitlement is calculated based on his/her anniversary date, which generally appears to work to the disadvantage of the individual affected. It is also interesting to note that any employee who takes all of his or her vacation entitlement before going on a parental or pregnancy leave suffers no vacation pay consequence and the employer does not seek repayment of vacation pay which is not ultimately "earned". However, an employee who takes pregnancy or parental leave and has not already used up all of that year's vacation, will not get vacation pay for the time that s/he was on leave.
11What is clear from the Allstate vacation policy outlined above is that there is a distinction made between vacation days and vacation pay. Allstate claims to have linked the receipt of wages to the concept of vacation pay, while active service is not required for the accrual of vacation time.
12In the course of the Officer's investigation Allstate conducted a self-audit of who may be affected by the interpretation of the vacation policy. It was determined that there were two groups of affected employees: Those who had begun their pregnancy/parental leave before December 1, 1996 (the date upon which the relevant section of the Act changed) and who returned after that date; and, those who began and finished their pregnancy/parental leaves after December 1, 1996. For the former group liability was only found for the period after December 1, 1996. For the latter group liability was found for the complete period of their respective leaves.
13In this appeal Allstate argues that its vacation policy is consistent with the requirements of the Act, and that in any event, its policy grants employees a greater right or benefit than the Employment Standards Act requires as a minimum. The policy gives employees the right to take vacation in each year of employment, whether or not it has been earned at the time it is taken. In the first year of employment this is a particular benefit, as an employee does not have to wait until the vacation time is earned completely. Further, Allstate argues that it raises the vacation entitlement from the third year on to above the minimum standard. The employer therefore states that looking at the vacation policy as a whole, all employees of Allstate enjoy a greater right or benefit in the area of vacation than the Act requires the employer to offer.
14The employer asks the Board to consider the legislative changes to sections 42(4) and 28 in its analysis. It argues that while the legislature changed section 42(4) to ensure that a pregnancy/ parental leave of absence is included in the calculation of an employee's active service for some purposes, it did not indicate through the changes that all benefits of active employment flow to the employee through the period of the pregnancy/parental leave. In Allstate's view since wages do not continue, entitlements tied to wages do not continue through the period of the unpaid leave. Thus, while the accrual of vacation time, which is tied to the concept of continuous service, must continue during a pregnancy/parental leave, vacation pay, which is tied to the receipt of wages, does not have to continue.
15With respect to section 28 of the Act the employer argues that the section only indicates that vacation accrual occurs whether the employee is actively employed or not. However, Allstate points out that where the previous version of the section referred to vacation with pay, in the amended section vacation time and vacation pay are separate subsections. The changes make clear that vacation time accrual must continue during pregnancy/parental leave, but there is no reference to vacation pay continuing to accrue. Allstate therefore posits that the calculation of vacation pay must still remain based on wages earned.
16The Ministry of Labour starts its argument from the position that pursuant to section 4 of the Act, if the employer has an arrangement or employment contract with its employees which is better than what the Act dictates, that becomes the standard. It argues that there is therefore no reason to look to section 28 for guidance.
17With respect to Allstate's vacation policy, the Ministry states that the policy is service driven. All entitlements to vacation are based on how long an employee has been at Allstate. Thus, whatever an employee may have earned in a previous year is immaterial to what vacation pay the employee will receive when taking his or her vacation. Vacation pay is just a continuation of the individual's present salary for the time taken on vacation. The only persons who do not have this regime are those who take pregnancy and/or parental leave as they accrue vacation time, but do not get paid if they take that time. Even those employees who take leaves of absence are not in the same category, as they simply do not accrue vacation entitlements during the leave.
18The Ministry argues that the employees in question are salaried employees and are not paid vacation pay as a percentage of their earnings. The vacation policy is a part of their contract of employment. Therefore, section 28 has no application as it applies where an employee has no contract of employment. The Ministry bases its argument on a reading of section 42(4) of the Act and is of the view that since Allstate does not describe its vacation pay as a percentage of wages earned, it cannot tie the payment of vacation pay to whether or not an employee is on a paid or unpaid leave.
19The Ministry urges the Board to consider bundles of rights in relation to other similar bundles of rights in its assessment of whether there is a greater right or benefit in the Allstate vacation policy than there is in the minimum standards in the Act. Thus, the Board should not consider a comparison of the vacation policy to the pregnancy and parental leave provisions of the Act, because to do so would lead the Board to have to find that Allstate has granted all its employees better vacation entitlements, but that those entitlements balance out the diminished pregnancy/parental leave protections.
20It is noted for the record that no party to this proceeding argued that the Allstate policy has the effect of imposing a penalty on employees taking pregnancy or parental leave. Further, there were no arguments made regarding the application of the Human Rights Code.
DECISION
21Addressing the section 4 issue, for the reasons that follow, the Board finds that the Allstate vacation policy provides employees with a greater right or benefit than does section 28 of the Act, respecting vacation with pay. The Employment Standards Act requires employers to give employees at least two weeks of vacation "upon the completion of 12 months of employment", and indicates that an employer must pay the employee not less than 4 per cent of the wages earned in the 12 months for which the vacation is granted. This has the practical effect of an employee not being eligible for two weeks of vacation before having worked for 12 months, and the employer is only required to pay 4% of the wages earned for the time worked during that period. The Allstate policy allows an employee to take vacation before it is earned, to be paid the employee's regular salary during that vacation, and even if the employee leaves the company or goes on an unpaid leave of absence before the vacation taken is earned, Allstate does not seek a return of the monies paid. Further, after two years of service, Allstate employees are eligible for three weeks of vacation, so the statutory minimum is surpassed, and a greater benefit is granted. This greater entitlement to vacation increases with further years of service. The Allstate policy also mandates the accrual of vacation time (albeit unpaid vacation) during pregnancy and parental leaves of absence. Thus, it is clear that the Allstate vacation policy provides employees with a greater right or benefit than does the employment standard. Therefore, in accordance with section 4 of the Act, the Board finds that the vacation policy prevails over the employment standard in section 28.
22Section 42(4) was changed as of December 1, 1996. Those changes appear to have clarified what the arbitral and Office of Adjudication jurisprudence had been wrestling with for some time. The Legislature amended this section to add that the actual period of a pregnancy or parental leave is to be included in the calculation of an employee's length of service, length of employment, and seniority, for the purpose of determining whether the employee has a right under a contract of employment. Thus, even though an employee would not be working during these leaves, and therefore not in "active service" for the employer, nonetheless, the period of the leave taken is to be included in any calculation of the employee's service with the company.
23It is undisputed that a vacation policy is not a benefit plan, so sections 42(1), (2) and (3) are not engaged for the purpose of my consideration of the question in this case. In reviewing the Allstate vacation policy in relation to section 42(4) it is apparent that Allstate has ensured that any employee taking pregnancy or parental leave continues to accrue service during the time of the leave of absence in order to be eligible for enhanced vacation credits. Further, the Allstate policy permits employees taking pregnancy or parental leave to accrue vacation credits during the leave of absence. Thus it would appear that Allstate's vacation policy accords with the requirements of section 42(4) of the Act.
24However, that is not the end of the matter. The Ministry of Labour argues, and the Employment Standards Officer found, that Allstate is in breach of the Act because it only permits its employees on pregnancy or parental leave to accrue vacation time, but does not pay employees vacation pay for that time if it is taken. The Ministry is of the view that because the Allstate employees in question are salaried employees whose regular vacation time is paid at the employee's current salary rate, therefore the time that an employee accrues should similarly simply be paid at the employee's current salary rate. The Ministry argues that paid vacation entitlement is tied to length of service with the company, so that vacation pay and vacation entitlement are inextricably linked. It is argued that Allstate is breaching the Act by de-linking vacation entitlement and pay for those who take pregnancy or parental leave even though that leave is unpaid. However, the Ministry concedes that if Allstate had a policy of paying its employees vacation pay as a percentage of earnings, there would be no breach of the Act. In that case, it argues, the quantum of vacation pay would be based only on what had previously been earned, and since there would be no earnings during the period of the pregnancy or parental leave, there would be no violation of the Act.
25The Board is satisfied that Allstate's vacation policy conforms to the requirements of section 42(4) of the Act. An employee who avails herself of the right to take pregnancy or parental leave continues to have her vacation entitlement accrue as though she was actively at work. It is noteworthy that normally vacation entitlement is based on each full month worked. Clearly, a person on pregnancy or parental leave is not working during the months of the leave. Notwithstanding that the person is not actively at work, the Allstate policy (in accordance with the statute) also allows her to accumulate service time in order to be eligible for enhanced vacation entitlements that are based on how long an employee has worked at Allstate.
26Nothing in the Employment Standards Act suggests that there is a requirement that an employer provide an employee who takes pregnancy or parental leave with paid vacation time. As has already been indicated above, section 28, which addresses vacation entitlement, is overridden in this case by the enhanced vacation package that this employer offers. However, it is instructive to review what the statute contemplates as a minimum standard. Section 28 indicates that an employee is entitled to two weeks of vacation in a 12-month period, whether or not the person is engaged in active employment. Subsections 28(2) and (3) state that an employee must be paid a minimum of 4% of wages earned during the period for which the vacation is being given. The reference to "vacation with pay", in the previous section 28(1), has been removed. This suggests that the amendments to the Act which came into force on December 1, 1996, were designed to de-link vacation entitlement from vacation pay. What now appears to be contemplated is that there may be vacation time accrued whether or not an employee is actively at work during a 12-month period. This would be consistent with the section 42(4) requirement that service, seniority and length of employment are to accrue during an employee's pregnancy or parental leave. However, vacation pay is linked to wages earned, i.e. active employment, and nowhere in the statute does it suggest that an employee on an unpaid pregnancy or parental leave is to be paid vacation pay as though the person had been working during that time.
27The Board cannot accept the Ministry's argument that because the Allstate employees are salaried employees they should therefore receive paid vacation for the time accrued during a pregnancy or parental leave. The Ministry has conceded that hourly paid employees, who may receive vacation pay as a percentage of their earned wages, are not entitled to vacation pay for vacation time accrued during a pregnancy or parental leave. Hourly paid employees can have wage and benefit packages which provide them with greater rights or benefits than the Act requires, so they may well be in exactly the same position as salaried employees. It is difficult to see any fundamental difference between these two groups of employees such that one could conclude that they should be treated differently. Indeed, it appears to be somewhat arbitrary to find that one group of employees would receive paid vacation because they are salaried, whereas another group in much the same position would not receive paid vacation because their vacation pay is normally determined as a percentage of wages earned. In the absence of any direction in the statute one way or the other, and indeed, in the absence of anything to suggest that persons taking pregnancy or parental leave are to receive paid vacation which may accrue during those leaves, the Board is not prepared to find that the Act requires employers to provide employees with paid vacation in these circumstances.
DISPOSITION
28For all of the reasons outlined above I find that the Employment Standards Officer's Order to Pay in EPB File No. 41006460 must be rescinded. The Director of Employment Standards is hereby requested to return to Allstate all monies, including any accrued interest, held in trust pursuant to this Order. I will remain seized in the event that there are any issues that arise out of the decision or to address any remaining issues in the two applications. The parties are directed to advise the Board within 30 days of the date of this decision of whether there are any further matters to be addressed. In the event that the Board does not hear from any of the parties within that time, these two applications will be deemed terminated.