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Unpaid holiday and vacation pay lead to class action lawsuits

According to recent reports, several employers across Canada, including in British Columbia, find themselves facing class-action lawsuits. Employees are claiming significant amounts of unpaid holiday and vacation pay, stemming from years of systematic denial of statutory compensation. There are a few errors that employers can avoid in order to prevent such lawsuits. 

Unpaid holiday and vacation pay frequently arise due to fundamental calculation errors made by employers. Depending on jurisdiction, the applicable employment standards legislation requires the following minimum standards: 

Vacation pay

Vacation pay amounts depend on the jurisdiction and the length of service of employees. Employers must calculate vacation pay correctly to ensure the employee does not lose any income during annual vacations. The percentages used in calculating vacation pay typically range between 4% and 8%. In British Columbia, employees must be paid an amount of at least 4% of their total wages – including commissions – as vacation pay until the fifth year of employment, at which time they are entitled to 6% vacation pay. 

Holiday pay 

Employees should not be denied compensation for statutory holidays like Christmas Day and Canada Day. The amount typically equals the regular wage worked out as a fraction of the worker’s monthly salary or wages for a specific period before the statutory holiday, as calculated in accordance with the requirements of the employment standards legislation. In British Columbia, employees who are not required to work on the statutory holiday are still entitled to be paid an average day’s pay. Employees who are required to work are entitled not only to an average day’s pay, but also time and a half for the first 12 hours of work on the statutory holiday, after which they are entitled to be paid double wages.

Classification of workers

Employment standards legislation which confers a right to vacation and holiday pay does not apply to independent contractors – only to employees. Many claims for unpaid vacation and holiday wages result from employers’ intentional or accidental misclassification of employees as contractors, thereby denying them their statutory entitlement to vacation and holiday pay. When this happens, adjudicators may order employers to remunerate the misclassified employees for months or even years of denied or miscalculated holiday and vacation pay.

We strongly encourage that employers looking to minimize costs by hiring independent contractors seek legal advice. Timely legal assessment and advice may help to prevent substantial liability for unpaid wages down the road.

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