In New Jersey, is an employer required to pay workers for accrued vacation upon termination? If not, how can an employer change the company policy on vacation pay?
To answer the second question first, company policy can only be changed in states that do not have laws requiring payment of accrued vacation time.
New Jersey is one of those states, so amending company policy should be straightforward. The best protocol to follow is to inform all employees in writing of the upcoming changes. This letter, or memo, should be sent well in advance of the effective date of the changes to allow time for all workers to receive and read the information. Asking all workers to sign the memo or letter and return it can help ensure that all employees receive the notice.
Payment for accrued vacation time can be a difficult topic. The Maryland Court of Special Appeals recently reviewed a case regarding accrued vacation pay-out. The August 2007 case of Catapult Technology, LTD, v. Wolfe resulted in a ruling which considered accrued vacation to be covered under Maryland minimum wage law, and therefore must be paid. The Maryland Department of Labor, however, does not categorize accrued vacation as wages, so doesn’t enforce its payment.
Employers that do pay terminated workers for accrued vacation time, do so in a couple of different ways. Business O-MY pays accrued vacation time to all employees who get laid off and to all employees who give two weeks notice before resigning. If an O-MY employee is fired, he or she does not receive payment for accrued vacation time.
Business I-SEE pays accrued vacation for all employees, even those who were fired–except for persons fired for gross negligence, such as stealing.
Some states have laws requiring payment of accrued vacation and others don’t. As a result, companies with employees in several states have no clear rule how to manage pay-out of accrued vacation. Some companies pay accrued vacation time to all employees, regardless of the state they work in, because these companies believe all employees should receive the same benefits.
Other employers follow state laws and pay accrued vacation time only to workers in states where the law requires payment. Workers in states without such laws are denied this payment. JH
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