Statutory Vacation Percentage Implied in Employment Contract

In Hoefman v Lawrence Meier Trucking Ltd., 2025 ABCJ 13, the Alberta Court of Justice provides important guidance on vacation pay entitlements when employment contracts are verbal and unclear. The decision emphasizes the importance of clear employment agreements and highlights how courts will interpret ambiguous employment terms.

One reason this case is important is because it affirms the principle that statutory entitlements from employment standards can be implied in employment contracts, so employees can sue for those amounts in an ordinary court without having to use the employment standards process.

Facts

The key facts of the case are as follows:

• The plaintiff employee Robert Hoefman worked as a superintendent for Lawrence Meier Trucking Ltd. for 18 months, having been promoted from a supervisor position where he had worked for 32 months.
• In his previous hourly role as supervisor, Mr. Hoefman earned an annual salary of $122,000, including 9.6% vacation pay as per the company’s policy for hourly employees.
• Upon promotion to superintendent, he agreed to a verbal contract with a $120,000 annual salary.
• Neither party discussed or documented vacation entitlements in the new role.
• The employee sought 9.6% vacation pay on his salary and argued his employment was continuous through both his supervisor and superintendent roles.
• The employer claimed that vacation pay was already included in the salary. They also claimed that the new salary agreement constituted starting over in terms of calculating the employee’s length of employment.

Analysis / Conclusion

Justice Maxwell considered the various approaches courts use to recognize contractual obligations in the employment relationship where no written agreements exist, concluding as follows:

[18] …. I believe the most appropriate approach is to consider the terms that were so customary, that the Court is required to imply them, particularly given that I have some doubt as to whether or not the parties would have been in agreement with the terms. In order to do so, I believe it’s important to refer to (…) the Employment Standards Code, RSA 2000, c E-9 [citations omitted]

34(1) An employer must provide an annual vacation to an employee of at least

(a)   2 weeks after each of the first 4 years of employment, and

(b)   3 weeks after 5 consecutive years of employment and each year after that, unless section 35 applies.

Justice Maxwell effectively rejected both parties’ positions, finding that there was no clear agreement or support for either. The employer couldn’t argue vacation was included in the salary when they failed to specify any entitlement or track time off. Similarly, the employee’s claim for 9.6% vacation pay was rejected since their previous year’s total compensation (including 9.6% vacation pay) was $122,000, making it unlikely the employer would have agreed to pay 9.6% on top of the new $120,000 salary. Additionally, Justice Maxwell found the employee’s 50 months of total service (combining 32 months as supervisor and 18 months as superintendent) should be treated as continuous employment.

Ultimately, the Court concluded that while the employer neglected to specify vacation entitlements, it was appropriate to imply the statutory minimum vacation pay (4%) in addition to his salary.

My Take

This decision offers several important lessons for employers and employees:

1. Employees Can Sue in Civil Court for Employment Standards Amounts: If there is no clear agreement on amounts covered by employment standards, courts can find that statutory amounts are implied as part of an employment contract, which allows an employee to sue in regular civil court for those amounts.
2. Written Contracts Can Prevent Disputes: The entire dispute could have been avoided with a clear written employment agreement specifying vacation entitlements.
3. Continuous Service: When promoting employees, employers should remember that service years carry forward for vacation entitlement purposes unless explicitly agreed otherwise.
4. Default to Legislation: Ambiguous terms will not always default to legislation. If there would have been more evidence to support the plaintiff’s position, there is a chance the court would have awarded him 9.6% of his pay.
5. Documentation Matters: The employer’s failure to track or document the employee’s vacation time weakened their position that vacation was included in the salary.

The case serves as a reminder that while verbal employment contracts are legally binding, they often lead to misunderstandings and disputes. Employers and employees should ensure all employment terms, particularly those involving compensation and benefits, are clearly documented and understood by both parties.

Isabella Hernandez is an employment lawyer at Bow River Law in Calgary, Alberta.

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