“Negative Vacation Banks” are contrary to the Employment Standards Act

According to the Employment Standards Act, employees are not entitled to paid vacation time during their first year of employment. That is because employees accrue entitlement to vacation as they work. In other words, an employee who works one full year, is entitled to two weeks of vacation. Notwithstanding this, many employers allow their employees to take vacation time during this first year. In order to reconcile that the employee does not have entitlement to that time, the employer will bank this time in a “negative vacation bank” which can either be paid off with overtime work or will be deducted from the employees’ wages at the end of employment.  However the practice of deducting negative vacation time from wages, without the written authorization outlined below, does not comply with employment standards legislation.

The only way an employer is able to legally deduct money from an employee’s wages, according to section 13 of the Employment Standards Act, is if the employee has signed a written statement authorizing the deduction.

A written authorization by an employee must state that the employer is permitted to make a deduction from their wages, as well as:

1) Specify the exact amount to be deducted; OR

2) Provide a method of calculating the specific amount of money to be deducted

If an employer makes a deduction from wages without following the legislation, the employer will be unjustly enriched. The test for unjust enrichment is set out in the Supreme Court decision of Garland v. Consumers’ Gas Co. and has three elements:

1) An enrichment of the defendant;

2) A corresponding deprivation of the plaintiff; and

3) An absence of juristic reason for the enrichment.

If your employer is utilizing a “negative vacation bank” policy, this is contrary to the Employment Standards Act, please make sure to let us know.

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