A company can set whatever policies it wants as long as it does not violate labour laws.
I think the policy you mentioned should be allowed, but I don't think it is a good long term solution for a typical job.
For example, I am the only in house system admin at my company. If I took 2 months off then there are a lot of things that would not get done. My boss can do some of it, and does when I take my vacation etc, but it cuts into what he needs to do as part fo his job. If I am taking extra time on top of my vacation and personal days then it stands to reason that not only would it be detrimental to our systems (since he obviously isn't doing everything that I do, or as well) but it would cut into his productivity a lot. Bringing in a contractor to do the work would be extremely inefficient, and probably cost upwards of twice as much.
Now, that isn't the case where I work and if it needed to happen, it would happen, but it is a clear example of a situation where could be really hard on a company for someone to leave.
Another example, on the other side of the coin: Wife worked at Shaw. She tried to take a 3 month LOA to deal with our family situation which changed and they refused , as a matter of company policy. However, because they didn't want to give her a LOA, she doesn't work there any more and she was by far the most experienced person who was working in her department. In a situation like that, its not like they wouldn't have managed if 19 people were doing the job instead of 20 (making up numbers).
I guess the bean counters decided that enough people would be on leave at any given time that if they allowed it at all, then it would impact their workforce more than the people who would quit because of such a policy. Just a guess though.
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