Last year, the Court of Appeal handed down a judgment that may forever alter the way that vacation leave is accumulated, calculated, bought and sold. The court awarded a man, who had been employed as a cowhand, nearly $150,000 representing payment for over 17 years of unused vacation.
It's the story of a simple man who worked for the same employer for more than 17 years without ever getting a holiday. The worker was dismissed in 2008 without receiving payment for his unused vacation. He made a claim in the Resident Magistrate's Court for unused vacation pay and was successful. His former employer appealed. Then President of the Court of Appeal, the Hon Mr Justice Panton (who is now on well-deserved vacation leave, having not taken any for years) handed down judgment in favour of the worker. Mr Justice Panton accepted the worker's evidence that whenever he broached the subject of vacation leave with his employer the response was "cow don't get holidays". The learned judge said that the most favourable interpretation that could possibly be given to such a statement was that since cows don't get holidays, the cowhand couldn't get one either.
During the appeal the employer's attorneys advanced the argument that the Holidays with Pay Order, 1973 allows workers to carry over unused vacation days for a maximum of 3 years but only if there is an agreement in place between the employer and worker to that effect. They relied on the following provision in the Order, the material part of which is set out below:
"The holiday with pay that any worker has earned in any qualifying year...(a) shall be granted by the employer in the next succeeding year...or (b) may by agreement between him and the employer be granted in that qualifying year...or (c) may be carried forward and added to any holiday with pay which he may earn in the first two succeeding qualifying years if there is provision for accumulation of holiday with pay for not more than three consecutive years in an agreement subsisting between him...and his employer..."
The employer argued that as there was no agreement with the worker for accumulation of holidays, he was only entitled to take his holidays in the "next succeeding year". The argument continued that since he had not taken the vacation, it had been forfeited and any possible claim in relation to that matter was now statute-barred. The Court found no merit in that argument. It found there to be no prohibition in the law on the accumulation of vacation leave beyond 3 years. It said that the parties were free to contract with respect to the accumulation of vacation leave in the absence of a clear prohibition in the law or the agreement being contrary to public policy. The Court reasoned that as the employer could not have intended to deprive the worker of his right to be paid for the holiday there must have been an agreement between them that the worker would not get holidays but would receive monetary compensation for the unused vacation. It's not clear from the judgment whether there was any evidence to support the existence of such an agreement, which, in any event, would seem to be an illegal agreement.
The Order lays down the general rule that holidays shall be taken in the year after they were earned. In my analysis, it then allows only 2 exceptions to this rule, both of which require an agreement between the worker and the employer. The first exception is where both parties agree that the vacation may be taken in the same year that it was earned. The second exception is where both parties agree that the holidays may be carried over for up to three years. The inclusion of the words "not more than three consecutive years" suggests that there is, in fact, a limit on the extent to which the parties can agree to depart from the general rule in the law. This view seems to have been shared by former Minister of Labour the Hon. Pearnel Charles, who on July 31, 2009 was reported in the Daily Observer as stating that he was seeking to amend the law to allow for the accumulation of vacation leave for up to four years.
The accumulation of vacation leave beyond 3 years could also be seen as being contrary to public policy. The purpose of the Holidays with Pay Act is to ensure that workers get more paid holidays, not more pay. Its focus is on social betterment - to ensure that workers take time off to spend with their families; time to enjoy the fruits of their labour. The Act safeguards vacation leave by forbidding employers and employees from contracting out of its provisions except to the extent expressly allowed in the Act. It is a criminal offence for an employer to "fail to allow" a worker to take vacation, or to enter into an agreement whereby the worker agrees to receives any less benefit than the law gives him. The maximum fine for that offence is $250,000, considerably more than what the employer in this case was ordered to pay to the worker. Don't hold your breath waiting for the employer to appeal this decision to the Privy Council.
The Court of Appeal also found that, in any event, the provision in the law that requires an employer to pay for unused vacation leave whenever a contract is terminated is not limited to only the vacation leave earned during a particular period. In other words, even if the worker had lost the right to take the days off, he had not lost the right to be paid in respect of those unused vacation days at the end of the contract. If that interpretation is correct, a worker would not forfeit his right to unused vacation pay, even if he never made an application for vacation leave at all. It's hard to imagine that that was parliament's intention. The problem with that interpretation is that the law would be self-defeating. Instead of protecting workers' vacations, it would encourage employees to take fewer days off so they can accumulate unused vacation pay much like long-term savings. The law would be restricting accumulation in one section and rewarding it in the other. In order to give effect to the purpose of the law, the interpretation to be preferred is that upon termination of the contract, a worker is to be paid for all unused vacation leave that he was entitled to take at that point in time and not the leave that he is no longer entitled legally entitled to take.
In the wake of this judgment, there may be more pressure on workers to enter into agreements that are similar to the one the cowhand was found to have made - more pay for less play. Or worse, unscrupulous employers might now tell workers all kinds of "horse dead and cow fat" excuses when they apply for vacation leave in the hope that the workers will get frustrated and defer their plans indefinitely. At the same time, workers who were told by their bosses that they had forfeited unused vacation leave might now take the bull by the horns and demand enormous sums as retro pay. Hopefully the Court of Appeal will have an opportunity to revisit this decision before employers start seeing red, or worse, milking what might eventually be seen as an incorrect decision.
Gavin Goffe is a Partner at Myers, Fletcher & Gordon and is a member of the firm's Litigation Department and Labour Law Practice Group. Gavin may be contacted via email@example.com. This article is for general information purposes only and does not constitute legal advice.