In Canada, I believe that it is a legal requirement to pay out the accumulated vacation pay upon the employee's termination. To confirm that, you would have to check the Employment Standards Act of the Province where the employee was/is working.
For example, here is the site for the Ontario Ministry of Labour
Employment Standards | Ministry of Labour
The required payments upon termination most likely are the same eve if the employee is "re-hired" immediately as a "temporary" employee.