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Legal Clinic

Stepping Out

Are employees who walk off the job entitled to accrued vacation time? The answer mostly depends on which state the company's facility is located in, according to this installment of the Legal Clinic.

Monday, July 25, 2011
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Question: We have employees in New York and Wisconsin. Last week, two employees (one who worked in New York and one who worked in Wisconsin) voluntarily "walked out" during their shifts. Are we required under either New York or Wisconsin law to pay out accrued, unused vacation time to these employees?

You are wise to ask the question, since the laws that govern whether a former employee must be paid for vacation time that he or she had earned but had yet to use at the time of termination vary widely from state to state. Therefore, it is critical that employers become familiar with the vacation pay laws of each state in which they operate, and ensure that their company policies comply with the laws.

Wisconsin

In Wisconsin, for example, employers are under no statutory requirement whatsoever to provide their employees with any vacation benefits at all, be they paid or unpaid. Individual employers within the state are, therefore, free to choose whether or not they will offer such a benefit, and they are likewise free to design a policy that either grants or denies accrued vacation time to terminated workers.

Such employers will, of course, be bound by the terms of their established policies or of the employment contracts they may extend to those they hire. Wisc. Stat. Ann. § 109.01(3); see also State of Wisconsin, Dept. of Workforce Dev., Labor Standards Information Series: Wisconsin Labor Standards Laws, (PDF) (last visited June 10, 2011).

Even if an employer in Wisconsin chooses to implement a policy or contractual term that grants terminated employees the right to be paid out for their accrued vacation time, such an employer can lawfully qualify those policies or contract terms so that employees must comply with specific requirements upon termination in order to receive a payout.

Such a qualification, for example, might require an employee to give two weeks' notice or that he or she be employed as of a specific date during the year. See Tasker v. Chieftain Wildrice Co., 2003 WI App 89, 263 Wis. 2d 432, 662 N.W.2d 679 (Ct. App. 2003).

Under Wisconsin law, employers are also able to cap the amount of vacation time their employees are able to accrue over time, or to implement a "use it or lose it" policy that would require employees to make use of accrued time by a date certain or lose their rights to it, as long as the employees have agreed to such a policy in writing. See Sinclair v. Hillhaven Corp., 161 Wis. 2d, 469 N.W.2d 249 (Ct. App. 1991).

Keeping all of the above in mind, whether or not your company will be required to pay an employee of its Wisconsin facility who walks off the job for his or her accrued vacation time will depend almost entirely on what the company's policies have to say about such a matter.

New York

The situation is a bit less straightforward in New York, where one of the central issues has long revolved around whether or not accrued vacation time can be considered "wages" that, under the New York Labor Law, terminated employees must be paid by the next regular pay day following termination. N.Y. Lab. Law § 191(3) (McKinney 2011).

A quick read of the statute would seem to indicate that the answer is "yes:" New York law includes "benefits and wage supplements" within the definition of "wages," N.Y. Lab. Law § 190(1) (McKinney 2011); vacation pay is likewise included within the statutory definition of "wage benefit." N.Y. Lab. Law § 198-c(2) (McKinney 2011).

It is, however, not that simple.

In Glenville Gage Co., Inc. v. Industrial Board of Appeals of State of New York, Dep't of Labor, 70 A.D.2d 283, 421 N.Y.S.2d 408 (3d Dep't 1979), aff'd, 52 N.Y.2d 777, 436 N.Y.S.2d 621 (1980) -- which is still the seminal New York case to consider the issue of payment of accrued vacation time -- a group of five terminated employees sued their former employer when it denied them payment for the vacation time they left unused upon termination.

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After reviewing a special term opinion that had gone in the plaintiffs' favor, the New York Supreme Court reversed and found the employer had acted lawfully when it withheld payment from its former employees.

The court held that, statutory language notwithstanding, the state's legislature had not intended for "vacation pay" to be considered "wages" for the purposes of mandatory payment on termination under the New York Labor Law. The state's employers, the court stated, are only required to abide by the terms of their own agreements to provide benefits to their employees. Id. at 286, 421 N.Y.S.2d at 410.

In the wake of Glenville Gage, New York employers are, much like their counterparts in Wisconsin, free to establish a policy whereby their employees will forfeit their accrued, unused vacation time in the event of termination. See Grisetti v. Super Value, Inc., 189 Misc. 2d 800, 736 N.Y.S.2d 835 (App. Term. 2001).

Employers in New York must generally make sure their employees have notice of such a vacation rule if its enforcement is to be upheld. Glenville Gage, 70 A.D.2d at 286, 421 N.Y.S.2d at 410. Such notice, though, can come in a variety of acceptable forms, and can include basic, general knowledge of an employer's regular practice. Id.

Once again, the answer to your question will depend in large part upon the written policies in effect at your company at the time the employee in question walked off the job, as well as what actions may have been established as the company's regular pattern and practice.

Keisha-Ann G. Gray is senior counsel in the Labor & Employment Law Department of Proskauer in New York and co-chair of the Department's Employment Litigation and Arbitration Practice Group.

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