Vacation Pay On Severance Pay

When an employee is terminated from their employment, a question that sometimes arises is whether the employee is entitled to receive vacation pay on their severance pay.

Under the Employment Standards Act, when an employee is terminated he or she is entitled to vacation pay on any severance pay which may be due under the Act.  Both the Act itself, and case law decided under the Act, indicate that vacation pay falls within the definition “wages”.

At common law, however, a terminated employee is generally not entitled to receive vacation pay on a damage award covering the reasonable notice period.  An exception to this general rule exists where an employee can demonstrate a real loss or expense associated with the loss of the benefit of vacation pay.  For example, an employee who can establish that an opportunity to take a vacation during the notice period was lost may be able to recover damages for that loss.

For further information on entitlement to vacation pay see the Employment Standards Fact Sheet at:
http://www.labour.gov.bc.ca/esb/facshts/annualfact.htm