We would like to start granting full vacation allotments to our employees at the beginning of the year, before they have actually accrued this time off.
What are the legal implications if an employee uses all of their vacation and decided to terminate their employment before they have accrued the total amount? As an employer, can we deduct the remaining balance off their last payroll cycle or do we just absorb the loss?
We have offices located in New Brunswick, Ontario, Quebec, Alberta and B.C.
You are effectively transitioning from an accrued pay to an fixed time model for vacation. In the event that an employee quits and has a negative accrued vacation pay balance, you, as the employer will absorb the cost.
Some cases have gone before the courts where employers have witheld pay for similar situations, along with uniforms, equipment, etc. In those cases the courts have more often sided with the employee with the exceptions being for equipment of high value and that are protected IP; for example, a company car or site schematics. Either way, the legal costs associated with the mediation/battle far outpaced the cost associated with the negative balance in accrued pay.
This is a risk in transitioning to this model, but if you are making this change for ease of management and cultural reasons, you are probably better off in the long run.