Does a 3-weeks’ vacation entitlement cost the Employer 4-weeks’ pay?

The Employment Act, 2001 provides a comprehensive set of minimum standards of employment within The Bahamas which includes, amongst other important aspects of the employment relationship, the vacation entitlement.

The statutory vacation entitlement

For an employee who has been employed for a term in excess of 12 months and up to 7 years, a minimum of 2 weeks’ paid vacation is entitled by statute. An employee employed for a term in excess of 7 years is entitled by statute to a minimum of 3 weeks’ paid vacation¹.

How is a “week’s” pay calculated?

A “week” is defined in the Employment Act as being a period of 7 days². The Employment Act also provides that in every period of 7 days an employer shall allow each employee 48 hours (i.e. the equivalent of 2 days) rest.³ Effectively, therefore, it has been the custom and practice of regarding the work-week as 5 days and a week’s pay based on the value of the 5-day work-week. Correspondingly, the 5-day work-week formed the basis of a week’s pay for purposes of calculating pay for the vacation entitlement.

The long settled basis for calculating the value of a week’s pay in the context of vacation entitlement was thrown into question following a decision of the Bahamas Industrial Tribunal during late 2013⁴ . In a decision resulting from a dispute between the Central Bank of The Bahamas and the Union of Central Bankers, the Tribunal President held that the computation of vacation pay for a week should be at the value of 7 working days as opposed to a 5 working days.

The basis of computation resulting from the Industrial Tribunal’s decision, meant that 3 weeks’ vacation entitlement (traditionally computed based upon 5 working days a week and aggregating 15 working days’ pay), would instead result in 21 days’ pay (the equivalent of more than 4 working weeks). The Industrial Tribunal’s decision had the effect of increasing the value and cost of vacation entitlement such that a 3-weeks’ vacation entitlement would cost the employer 4 weeks’ + 1 day’s pay.

On appeal to the Court of Appeal against a number of findings made by the Industrial Tribunal, the Court of Appeal quashed the decision relative to the computation of vacation pay⁵ . Effectively the status quo prior to the Industrial Tribunal’s decision is restored. The result: a 3-weeks’ vacation entitlement is valued at and costs the employer 3-working weeks’ pay.

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¹Sections 12 & 13 Employment Act, 2001

²Section 2(1) Employment Act, 2001

³Section 9 Employment Act, 2001

⁴No.1875/2013 – Central Bank of The Bahamas (Employer) and Union of Central Bankers (Union); Decision And Reasons; Harrison L Lockhart, Tribunal President, dated 28Aug13.

⁵SCCivApp & CAIS No.248/2013, Central Bank of The Bahamas v Union of Central Bankers; dated 26Nov13