Court: Employer owes fired worker for unused vacation
July 7, 2009 by Sam NarisiPosted in: Firing, In This Week's E-Newsletter, Latest News & Views, Law
For many companies, firing employees just got a little more expensive.
Many employers follow a policy of paying out unused vacation time to employees who voluntarily resign — but not when employees are fired.
But that practice has come under scrutiny in some areas. Take this recent case from Massachusetts:
Francis Tessicini was fired from his job at Electronic Data Systems Corp. (EDS). Before the termination, he’d only used one day of his allotted paid vacation — but, according to company policy, he wasn’t owed payment (which would’ve amounted to about $1,800).
He sued, claiming the policy was against the law. The case made it to the Massachusetts Supreme Court, which agreed EDS’s policy violated the state’s Wage Law.
Under the law, vacation is considered part of an employee’s wages, the court ruled, so it was owed to Tessicini along with his regular salary for work he’d completed.
That’s not the law of the land everywhere, though:
In 2007, the Minnesota Supreme Court took the opposite stance. Last year, Maryland passed a law clarifying that employers’ individual policies dictate whether vacation time will be paid out after termination.
The rules on payment of vacation time vary from state to state. Make sure you check your state’s laws and write your policy accordingly.
Cite: Electronic Data Systems Corp. v. Attorney General
Tags: Massachusetts, state law, termination, vacation
July 10th, 2009 at 11:16 am
If an employee has earned their vacation and not used it, we always pay it out, regardless of the reason they terminated and that’s been the case regardless of where I’ve worked or what state the workers lived in. I think it’s the only fair thing to do. They did earn it, whether they left on good or bad terms. If you’ve done your job correctly up front, if they leave owing you money, you should be able to payroll deduct (assuming their check is large enough) any outstanding balance. I wouldn’t feel comfortable withholding payment for something they had earned but not used.
July 10th, 2009 at 12:20 pm
Be careful about deducting payouts. Unless you have the employees written agreement to deduct money owed, you probably can’t do that either.
July 10th, 2009 at 1:05 pm
Our policy is that if you have been with the company for less than one year and you terminate for any reason PTO will not be paid out.
July 13th, 2009 at 11:47 am
my brother was terminated from his job in Maryland, the company is based in Mass, his PTO hours were not paid out when he left the company. where can we find out if they complied with the law?
July 13th, 2009 at 2:35 pm
It is my understanding from our employment lawyer (at least in Arizona) that if the vacation is accred, then it must be paid but if vacation is given at the end of a period, ie 1 week allotted after 1 year of employment, then you do not have to pay it. Our policy held up at the wage and hour division when 1 employee disputed it.