Human Resource Blog

Non Payment for Earned Vacation

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My employer’s vacation policy is; after completion of 1 year, you get 7.5 days; after completion of 2nd year, you get 7.5 days, and after 3 years you get 10 days. Having reached my 2nd anniversary, I gave notice that I am leaving the company. My employer feels that I am not entitled to ANY of the 7.5 days that I would have had at my disposal had I remained an employee of the company. Is he right in not paying me for those days?

The answer to this question will depend entirely upon which state the employee works in. In the majority of U.S. states, employees are not entitled to payment for accrued or earned vacation upon termination. There is also no federal law that requires employers to pay workers for unused vacation upon termination.

 

Either the employer will owe the worker all of the vacation time, or none of the vacation time. While the parties are certainly free to reach a compromise, there is no legal need to do so.

Several states do have laws that require employers to pay a worker for all accrued vacation time, upon termination. Workers in Illinois, California, Maine and Colorado, among other states, are entitled to payment in lieu of vacation when they leave a job.

In several states, the Department of Labor will enforce the employer’s own policies. So, if the employer has a written policy that workers are paid for their vacation time upon termination, then the state will require that the employer follows that policy. These states include Iowa.

Other states, including Oklahoma and Indiana, assume that employees will be paid for earned vacation time upon termination unless the employer has a specific policy in writing that states otherwise.

In other states, the matter must be decided in court. In Maryland, the court recently ruled that vacation time is “earned” by the worker and must be paid by the employer. This is a direct contradiction to the Maryland Department of Labor’s long-held regulation that vacation time is not “earned” and therefore may be withheld.