Accrued Personal Leave

We have a policy in our company that explicitly states five days of vacation pay and 10 days of personal leave are accrued and earned. When an employee terminates from the company, he or she is paid 100% of the vacation time earned and accrued, but only 50% of the personal leave time that is earned and accrued.

The policy also states that the vacation time must be taken in 5-day increments and must be used before the next anniversary date or it is lost. The personal leave time may be rolled over from one year to the next and there is not limit to the number of days one can hold on the books. The written policy states this fact, and it also states that the time is "earned" and that the employee "encouraged" to save up their time -- in other words, don't use it -- let it stack up.

My instinct tells me this is not all together legal. I think if you state it is something that has been "earned" then we are required to pay them out at 100%.

Can anyone help me with this? I lose every time I bring it up to the owners. Is there a statute I can refer to for assistance?

CarolH

Comments

  • 6 Comments sorted by Votes Date Added
  • Carol,

    You will need to look at your state's laws about earned vacation days. Some states do not all a "use or lose it" scenario. Some states (like Texas) do. But even in the states that allow a "use it or lose it" policy, the company policy will rule. Your company's policy seems a bit ambiguous. It is either earned and vested or can be forfeited.

    Good Luck!
  • You also shoot yourself in the corporate foot with the 5-day or nothing rule. Lots of people, like me, don't take 5 days off at a time and prefer to hook a day to a holiday or spread them out as fishing or motorcycle days. The company in my opinion benefits from that rather than a desk being empty for an entire week.
  • Check your state laws. Your policy wouldn't fly at all in California where we are not allowed a "use it or lose it" policy. It also sounds like you are treating personal days as vacation days - or are they sick days? If personal days are just another name for vacation days, but you can use them one at a time instead of needing to take 5 in a row, then I think you probably do have problems. I also agree with Don as to why you would require someone to take a whole week vacation at a time?
  • In some industries, banking is the first that comes to my mind, it is a common practice to require 5-day blocks of "vacation" time each year. This is an internal control function. It gives the company a reasonable time, keeping their mind on daily business activities, to see if anything unusual comes up during that particular employee's absence. If an employee only wants to take one day at a time throughout the year, this employee has a very good opportunity to "hide" things. I don't mean to say that every employee who doesn't take a block of time for vacation will act in a dishonest manner, but this does remove the opportunity. I am sure that everyone would agree that this does happen.

    I remember the story of an accountant for a professional sport club who never took vacations, or took only a day here or there, or even came back to process payroll while "on vacation". It turned out that he was padding the payroll with fake employees and splitting additional pay with others. His excuse was that the payroll system was complicated so that it was easier for him to come back and handle everything. So, they believed that they had a hard working, dedicated employee who in reality was stealing from them big time.

  • I work in Massachusetts. It is my understanding that if a benefit is "earned", the employee needs to be paid any unused time when they terminated.

    Our company's vacation policy states that all vacation time allowed in a plan year must be used before the start of the next plan year. Vacation time cannot be carried over unless authorized by the company president (essentially, use it or lose it). Vacation time is earned based on previous years of service; therfore, the balance remaining is paid out if the employee terminates.

    Hourly employees are given a certain number of sick days each January. Because these days are given and not earned, we do not pay out unused days at termination. If the employees were earning these hours/days based on each month of perfect attendance, for example, we would be obligated to pay out the unused time at termination.

  • I've heard that some company policies refer to vacations as a 'gift' from the company to be used if they stay employed, as opposed to something 'earned' or 'accrued', and therefore, not something to be 'cashed in' upon leaving. Any implications or comments about this from the legal community?
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