Employment Law 101: Accounting for vacation pay

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It may come as a surprise that there are no U.S. laws requiring employers to offer vacation time whether paid or unpaid to its workers. The U.S. is one of the few industrialized nations where the government does not regulate benefits in the private work sector. On the bright side, once a business establishes a policy, they must be sure they comply with related federal and state laws. In other words, once promised, employees are entitled to their vacation time and pay. So, if you are currently receiving vacation time, you will not have to worry that the rug will be pulled out from under your upcoming Fourth of July plans.

All Work and No Play

Yes, yes you read correctly. The US does not compel business owners to provide vacation pay. But, luckily in the land of liberal laissez faire economics, even if the government will not pressure business owners into providing vacation time, good old competition will. And, in order for any company to remain competitive in recruiting the best and the brightest, vacation is typically at the top of the benefits list.

What do you know about your company's vacation policy?

The best thing you can do to arm yourself is to read your company's Employee Handbook. Most companies include vacation policy in their employee handbooks. So, if the handbook is poorly written, does not follow state or federal laws, or does not follow its own company policies, employees can cite the handbook to prove unfairness in vacation policy and open the business to lawsuits.

Now, what if you are the business owner? What do you need to know about providing vacation pay?

Your first step as a business owner will always be to check with your state's labor laws regarding vacation for each and every kind of employee. You will want to evaluate who is eligible for vacation pay taking into account which employees are full time and part-time. You will also want to check how vacation is pro-rated for part-time employees. Then, you can set about determining or perhaps revising policies for your own company.

When you do, you will want to consider how vacation is accrued and accumulated. You should again consult the laws about accrual and accumulation so that you go by the book when you determine how employees receive vacation time. Traditionally, companies allow employees to accrue based on length of service, others based on pay period.

Unused vacation

The next big obstacle is unused vacation. Depending on the state, this area of labor law can get sticky so be careful. Are you planning on capping carryover vacation? Buyer Beware: some states like California prevent employers from having a "use it or lose it" vacation policy. Just so you know: the use it or lose it policy basically states: an employee forfeits accrued vacation if not used by an anniversary date. Conversely, an employer can cap the amount of vacation employees can accrue.

Unused vacation at termination

You may be wondering what happens when you terminate an employee. Remember, states may have laws protecting employees who have accrued vacation time and corresponding pay. So, if an employee accrues vacation time, the company must pay out the vacation pay when the employment ends.

Also, an employer cannot deduct vacation pay without the employee's consent. So, a business owner must pay all wages, including accrued vacation within a stipulated time period after the employee terminates. An employer cannot keep vacation pay so as to discipline an employee they release. In fact, some states will prosecute an irresponsible employer. On a special note, employees can also sue in civil court even if their state lacks specific laws regarding final wages.

Discrimination

Again, once in place, you cannot administer vacation in a discriminatory way. An employer who violates their own vacation policy in an arbitrary or inconsistent way with its employee or refuses vacation wages at termination may be violating Federal Laws; particularly, if an employer is using vacation to retaliate against an employee. An unfair or inconsistent vacation policy could be challenged by employees under the following Federal laws:

 

Government protected leave

Employers are not off the hook just yet. There is also government protected time-off. The types of leave protected by law include: voting, jury duty, military leave, as well as FMLA. Employers should check federal and state laws carefully, because there may also be instances when an employee cannot be compelled to use vacation time for such absences.

  • Voting: While there are no federal laws requiring private employers to give employees time off to vote, 32 states require paid time for the employee to vote. Depending on state law, violations can result in fines or even jail time to violating employers.
  • Military Leave - Any employee called to military service, training, or reserve duty who is not a temporary employee is covered by federal law. An employer may not charge military leave to vacation leave. The employee may choose to use their paid vacation time where military leave is not paid.
  • Jury Duty: Both federal and state laws require that employers of all sizes provide employees with jury duty leave. Under the federal law, employees have the right to take leaves of absence to serve on a federal jury. State laws protect employees serving on state and local juries. Violations by employers can be treated as contempt of court, misdemeanors or authorize employees to take court action.
  • FMLA: The Family and Medical Leave Act requires covered employers to grant employees up to 12 workweeks of unpaid leave during any 12-month period. While the federal law is directed to employers with 50 or more employees, several states have family medical leave laws for companies with far fewer employers.

 

One final thought

Although there are no specific vacation laws in the U.S., there are several federal and state laws that require employers to treat employees fairly when vacation policy is established. Some employees' absence is protected by laws that do not require them to take it as vacation time. Many state laws require employers to compensate employees for accrued vacation when they terminate. Establishing and carrying out policies so they are fair and do not violate other laws can be a complicated enterprise. There is no holiday for those responsible for administrating vacation policy.

Comments

For aproximately 35 years our retirement office has been rolling in vacation payoffs into the final average compensation. They are trying to stop it now as they said they 'have nothing in writing'.

Since these vacation days were accrued by work time - should they be rolled in? (7% retirement is deducted from the total payoff and sent to retirement office)

I work for a small trucking company that is also a brokerage and when they terminate an employee that has over a year of employment they do not pay accured vacation pay to anyone nor do they send out COBRA letters for insurance. I have a coworker who just got terminated and had worked for the company over 2 years and they are refusing to pay his vacation which is available every Juanary. Who does he need to go to to force them to pay it. We have had several drivers who were terminated and never got their vacation pay either.

Hi Linda, thanks for the question. Since LegalZoom isn't a law firm, we really can't offer legal advice or guidance. Please check out our attorney referral network to find an attorney who could assist you: http://attorneyconnect.legalzoom.com

In Colorado, vacation is a matter of policy. If you can establish the existence of a policy via handbook, past practice, etc, you can compel the employer to pay accrued vacation pay in accordance with the policy. If the practice or written policy says "use it or lose it on the anniversary date" that is what you'll have to live with. On the other hand if terminated employees are entitled to unused vacation pay then it must be paid along with unpaid wages under Colorado's Wage Claim Act within a very short period of time. If not, have a lawyer send a demand letter in compliance with the CWCA and if the employer fails to pay within the established time, he can be liable for penalties (payable to the employee) plus attorney fees. Most states have a similar statute.

Check with your states bureau of labor. They might even take the case up for you. It is always best to have your own lawyer, but they can easily eat up all the vacation pay and then some. Certain states add penalties if final pay, including vacation, is not paid within a certain period of time. Disclaimer: I am not a lawyer, nor do I play one on TV, Radio, or in real or imagined life.

I have a question in regard to a lien on my property. I wonder if someone can guide me in the right direction on how to proceed.
In trying to refinancing my home mortgage loan, the bank, much to my surprise, discovered a $22K lien on my property.
Since I originally bought the property from a private investor, I have refinanced the house twice with different banks. This is never come up before.
I've located the previous owner's phone number, called him but get no reply.
What can I do next?
Any help is appreciated.
Thanks

Hi there, you raised a really great question, but we don't offer any type of lien service at this time, nor can we offer legal advice. We can help you find a lawyer to answer your questions, though. Please visit our attorney referral network: http://attorneyconnect.legalzoom.com

I work for a US company that has about 1/2 its workforce in the US and the other half in a European country. When it comes to vacation, the European workers get about 3X the # of vacation days as their US co-workers. I know there are no laws mandating vacation, but I understand that once a company establishes a policy, it must be administered equitably amongst all workers. Is there a basis of a lawsuit here? It seems very unfair considering we all work for the same company. Anyone have an answer or suggestions where I can find one?

Hello, thanks for your inquiry. This is really a great question, but because we are not a law firm we cannot provide specific advice regarding employment law. We can help you find an attorney to answer those questions though! Please refer to http://attorneyconnect.legalzoom.com to search for an attorney in your area.

I WAS TERMINATED 2 DAYS AFTER SIGNING AND SUBMITTING VACATION FORMS. I WAS TOLD BY THE MANAGER AND COMPANY CONTROLLER THAT I AM NOT INTITLED TO RECIEVE VACATION PAY ON THE GROUNDS THAT I WAS TERMINATED. 21 DAYS HAVE PAST SINCE BEING TERMINATED, I HAVE NOT RECIEVED MY COBRA PAPER AND I GOT ILL AND HAD TO SEE A DOCTOR. I PAID THE DOCTORS BILL AND PAID FOR PERSCRIPTIONS. AM I INTITLE TO RECIEVE COMPENSATION FOR THE EMPLOYER?

I live in CT and am transferring from CT to FL for my job. Is the company required to give me any time off for travel etc? My start date is Sept 13 and I am not being given any time off to get down to Florida. I work 2nd shift and punch out at 11:30 pm on Friday night. Seems quite unreasonable to me but is there any law requiring time off for work transfers?

Hi Frank, and thanks for your question. We're so sorry to hear about your situation, and we'd love to help, but our specialty is legal documents, not legal advice. We can help you find a lawyer to answer your questions, though. Check out our attorney referral network: http://attorneyconnect.legalzoom.com

Who is responsable of getting somebody to cover me while I am on vacations. My Manager keeps telling me that he does not care if I want to take some vacations but that I need to have someone to cover me. Is it my responsability to
find someone to cover me or should that be my managers responsability. Can he denied my vacation because of this. What I dont understand is that when I finally did get someone to cover me they told me that they could not pay someone to be here and then pay me for being on vacation.

Hello, thanks for your inquiry. We'd love to help, but our specialty is legal documents, not legal advice. We can help you find a lawyer to answer your questions, though. Check out our attorney referral network: http://attorneyconnect.legalzoom.com

I got laid off and only received a few hours notice, also i was employed for a 15 months and was about to ask for my vacation. Upon receiving my last check i realized the vacation pay was not accounted for, when asked about it my employer said it was not company's policy to pay vacation, holidays nor sick days.However i recently got a hold of the company employee benefit policy which clearly states that employees are entitled to vacation, holiday and sick day pay. should it take legal action?..... my employer refuses to answer my calls now

I gave 2 week notice to my employer & when i ask about him pay me my o/t & vacation time he said he didnt have to pay me
i work for him over 4 years
so i walk out on him today

can i sue to get my time due to me

i live in the state of Florida

Hi thanks so much for contacting LegalZoom. We'd love to help, but our specialty is legal documents, not legal advice. We can help you find a lawyer to answer your questions, though. Check out our attorney referral network: http://attorneyconnect.legalzoom.com

I live in California. My employer is in Michigan. My employer caps my yearly vacation accrual at 1 1/2 my yearly vacation. I am at their cap right now. My manager repeatedly denies my vacation requests. This represents lost wages. Is this legal?

Hi, thanks for the question. However, because we are not a law firm we are unable to provide any advice regarding this matter. We can help you find a lawyer to answer your questions, though. Check out our Attorney Services Department at http://attorneyconnect.legalzoom.com for more information on finding an affordable attorney in your area.

Hi,

I live in Virginia, but the headquarters of the company I work for is in North Carolina.

I have a part time job in which I have accrued 20 hours of vacation. I took 15 hours of vacation. I was not paid my regular hourly rate for those 15 hours. I was paid 6.2524 * 15 hours and not my regular 9.09 per hour.

When I submited a request for explanation, HR stated that my pay rate was based on a 52 week pay history average. Is that legal being that I'm part time and hours vary?

Hi, thanks for contacting LegalZoom. LegalZoom makes creating legal documents easy and affordable, but since we're not a law firm, we can't give specific legal advice regarding your situation. However, you can get free legal advice on the LegalZoom Facebook page every Friday and Tuesday. Check out Free Joe: http://zoo.mn/FreeJoe.

Hi,
I work in South Carolina and my company has a vacation and sick leave policy and we accrue vacation time at 16.67 hours per month and sick leave at 6.67 hours per month, up until recently if you had the time and gave the employer adequate notice time was approved, however, now the employer asks what you need time off for and if it's not for a doctors appointment you are denied, my question is is it legal for the employer to be able to ask what I need time off for? It is time I have accrued based on their policies after all. Thanks!

i quit my job with no notice my employer does not have an employee hand book. i had 1 weeks vacation coming.since i quit he says i am not entitled to my vacation pay. your thoughts please

I work for a Jewish owner, who has all these Jewish holidays. Me and my other co-worker are not Jewish. However, they take off a lot a lot of days making me and her work on those days.
There are about 7 people in one office. And when it’s a Jewish holiday it’s just me and my co-worker. To top it off they also take off holidays giving to us such as Christmas and New Years.

Is there any law against that???

If so where can i find such law in writing?

I live in Pennsylvania, is it true that salaried employees can not take vacation time in less than 8 hour increments?

Thank you!

AJ

I used to work for a company in FL where they gave "earned vacation time"; for every 8 hours worked, they deducted 30 min and put that amount towards the "earned vacation time" which reflected in a lower check than the hours worked, in other words, I paid for my own vacation.
After a while, I saved over 100 hrs, but then I got a new job, and per their policies established after I started working for them, now they are saying they will not pay me that amount because it is unused time, even though it was daily deducted from my pay check. What should I do?

CORRECTION:
What does it means "EARNED VACATION TIME as well as OVER TIME" for the company I used to work for...

I worked for a company in FL where they gave "earned vacation time" information after hired; for every 8 hours worked, they deducted 30 min and put that amount towards the "earned vacation time" which reflected in a lower check than the hours worked, in other words, I paid for my own vacation.

Also, when worked overtime, they put this extra time "towards the earned vacation time", so it is not paid when it is worked and it is paid as regular hour, not as over time if used as sick time or vacation day off.

After a while, I saved over 100 hrs, but then I got a new job offer, and per their policies established late 2011 way after I started working for them, now they are saying they will not pay me that amount because it is "unused time off", even though it was daily deducted from my pay check as over time or earned vacation time. What should I do?

May a California employer track vacation awarded as dollars instead of time? For example, employee Betty makes $10/hr and earns 10 days of vacation (80 hours at $10/hr = $800) during her first year of work. Betty receives a salary increase to $12/hr on Jan 1, and is surprised to learn that her vacation bank now shows 8.33 days. The employer asserts that it tracks vacation pay earned in dollars and only shows it as "time" for convenient reference. Is this an allowable practice? The bigger your raise, the more vacation you lose. It seems to me that this is a sneaky "use it or lose it" practice --i.e., any vacation time not used is subject to being reduced every Jan 1.

Hi... I'm in HR - and have a question about the use it or lose it prohibition -- the sales force for our company is in just about every state. I just learned that CA has a law which prohibits employers from taking vacation time away. Our company has always had the practice of allowing only one week carry over into the next year and if there are more hours left in the vacation bank, then those hours are lost. What other states have a use it or lose it prohibition policy?

i work for a car dealer who made us sign a pay plan 2 years ago where we were paid $250 a week plus commission and you will get 2 weeks vacation pay as an average of one weeks pay for example if you made $100,000 income foe the previous year ending Dec. 31 you will get paid $2000 a week for the 2 weeks vacation you are entitled to Today they presented us with a new pay plan where we will get $400 a week in pay plus commission and that the previuos year vacation earned will be paid at a $400 week for vacation I feel this is an injustice as I earned my vacation time and pay under the old pay plan Can you tell me what is right and legal before I take actionnn Also if I left the firm will they have to pay me at the $2000 a weekk vacation pay or will they try to pay me $400 a wek from the new pay plan Thank you for your help



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