Unlimited Vacation: Here's the Catch!

Unlimited Vacation sounds like a dream, right?

No tracking. No accruals. No “use it or lose it” drama.

And best of all, no more playing vacation police.

It’s trendy too - especially in tech, where 1 in 4 companies now offer it.

It fits the times: people are more aware of burnout, mental health days are a thing, and the 9 to 5 is getting a much-needed shakeup.

But here’s the reality check: if you’re in Ontario (or anywhere in Canada), an Unlimited Vacation policy won’t get you out of your legal obligations, and if you’re not careful, it can cause more headaches than it solves.

The law still applies (even if your policy says “unlimited”).

In Ontario, employees are legally entitled to:

• 10 vacation days and 4% vacation pay (increasing to 15 days/6% after 5 years).

Unlimited Vacation doesn’t override this. You still need to:

• Track how much vacation your team is actually taking,

• Pay out vacation pay properly and on time,

• And keep clear records for at least 3 years.

No tracking = non-compliance = potential fines or claims.

Worried they’ll take too much time?

Here’s the twist: most people take less time off under Unlimited Vacation policies.

Why?

• The rules are fuzzy, so people hesitate.

• No one wants to look like they’re slacking.

• High performers often skip breaks to stay competitive.

• Your culture might say “take time off,” but your leaders don’t.

It’s not that people abuse the policy - they underuse it.

Here are some legal risks to watch out for:

1. ESA violations

   If you don’t track time off or pay vacation pay properly, you could face Ministry of Labour complaints.

   
   

2. No records = no defence

   If a claim is filed and you’ve got no documentation, you’re out of luck. “But we told them they could take time off!” won’t hold up.

   
   

3. Constructive dismissal risk

   Switching from accrued vacation to Unlimited Vacation without a clear, written change could open you up to legal claims, especially if it looks like you’ve taken something away.

So, can Unlimited Vacation work?

Yes. But only if it’s done right.

You need:

• A written policy that makes it crystal clear ESA minimums still apply.

• A process for requesting and approving time off.

• A clause stating that unused vacation above ESA won't be paid out on termination.

• Clear documentation and tracking.

• Updated employment contracts that reflect the change

Unlimited Vacation can absolutely be a great recruitment and retention tool, if your culture supports it and your policy is tight. But don’t skip the legal fine print. If you want the perk without the problems, get it done properly.

Need help reviewing your policy or creating one from scratch? We should chat.