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Statutory holidays aren’t always celebrated on the calendar day that normally defines the holiday. For example, Christmas is always December 25th, but if that day is a Saturday or Sunday the general practice is to shift the employment standards entitlements to the next employee working day. An employee might also be asked to work on a statutory holiday and be given a later day off in lieu. Similarly, even if some employees take the actual day off, in most jurisdictions, where the holiday would not normally be a working day, other employees are owed a different day off work.
What happens in situations where a different day is substituted for the official statutory holiday?
Nothing much changes where the statutory holiday and the substituted day belong to the same calendar week or workweek. But there may be an impact when these days fall in different weeks or workweeks. The discussion here is based on the Ontario employment standards, but the concepts are similar in other jurisdictions.
Let’s first start by comparing this substitution to banked overtime. When an employee works overtime, if the overtime is banked, there are two possible scenarios: either the overtime dollars earned are banked or the overtime hours worked are banked.
If dollars are banked, the ultimate overtime payment is based on the pay rates in effect at the time the overtime was worked. By contrast, if overtime hours are banked, the usual practice is to pay these hours out, when taken as paid time off, using rates current when the time off is taken.
In Ontario, the rules are similar when employees take a day off with pay, as a day in lieu of a statutory holiday.
Since statutory holiday pay in Ontario is based on earnings in the 4 prior workweeks, when a substituted day is taken, the 4 prior workweeks are those prior to the substituted day, not to the initial statutory holiday itself.
In other words, to draw on the explanation of banked overtime above, when a substituted day is taken, holiday pay is based on the employee’s current earnings, not those at the time of the earlier statutory holiday.
In this sense, when a statutory holiday is substituted, time is being banked, not dollars.
The following example illustrates the calculations required.
An employee, subject to the Ontario employment standards, is eligible for the Canada Day holiday. The employer uses calendar weeks to determine employee entitlements like statutory holiday pay.
The employee normally works Tuesday to Saturday, so July 2, 2018, the day that Canada Day is recognized for employment standards purposes, is not a working day for this person.
Instead, the employee is given a day in lieu on Saturday, September 1, to give the employee 4 days away from work on the Labour Day long weekend. In the 4 workweeks prior to September 1, 2018, the employee had the following earnings, on which statutory holiday pay is based in Ontario:
Divided by 20, the employee is entitled to $128.75 in holiday pay ($2,575 / 20), for the substituted September 1, 2018.
Note: In this calculation, we haven’t looked at the employee’s hourly rate of pay or how many hours a day the employee normally or actually works. The calculation above is only based on an employee’s regular wages in the 4 prior workweeks, as those wages are defined in the Ontario employment standards.
However, this assumes the employee actually ends up taking the substituted day as a paid day off in lieu. What if the employee is not actively employed when September 1 comes around? There could be three different reasons an employee might not be able to take the substituted day-off:
- the employee has quit or been terminated
- the employee is on a temporary layoff
- the employee is on some other form of leave or approved absence from work
Except where the employment relationship has completely ended, there are essentially two options: either the employer may substitute another, later day for the initial Canada Day holiday or the employer and employee may agree that any statutory holiday pay owing simply be paid out.
Where there is no longer an employment relationship, taking a later day in lieu is not usually an option, so any statutory holiday pay owing must be paid out by the employer.
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How must this statutory holiday pay be calculated when it’s paid for a substituted day not able to be taken?
Which 4 workweeks prior will the statutory holiday pay be based on:
- the 4 workweeks prior to the initial statutory holiday
- the 4 workweeks prior to the last day regular wages were earned
- the 4 workweeks prior to the actual statutory holiday payment
There doesn’t seem to be a very clear answer to this question in the Ontario employment standards. A reasonable answer would be to base holiday pay in this situation on the 4 workweeks prior to the initial statutory holiday. Anything else might risk reducing statutory holiday pay in situations where the employee may not be at any fault.
For example, if a substituted day falls 8 weeks into a temporary lay-off, statutory holiday pay based on the 4 workweeks prior to the substituted day would likely mean this pay would be zero, since an employee on temporary layoff would not presumably have earned any regular wages.