Human Resource Blog

Payment for accrued vacation

	Benefits
Total Compensation Summary Performance Improvement Plan Performance Appraisal and Review Employee Payroll Status/Change Form Employee Change Form

I work for a small, family owned company. The owner died, the company is in the process of being closed down because no family members wanted to operate it and no one was interested in buying it. The (late) owner wrote a vacation and sick leave policy that is extremely generous. It says that employees get 1 week of paid vacation after a year of service (which is pretty normal) but then goes on to say that employees accrue an additional week for each year of service BUT there is no upper limit stated in the HR policy. The sick leave policy is similarly generous. In theory, if a person had worked here for 20 years, they would be entitled to 20 weeks of vacation!

It is my belief that the employer wrote the plan this way to help out his brother-in-law who “worked” for the company basically because his family was being charitable. Or it could be, that since he wrote the employee manual without any input from an attorney or HR professional, he just didn’t realize the implicaitons of what he wrote.

Nothing in the written policy says anything about employees being paid for their unused vacation time if they leave the company — although in this case it is the case of the company leaving them. It does not say they are entitled to payment for unused vacation BUT it doesn’t state that they are not AND it doesn’t have any written “use it or lose it” policy to prevent people from accumulating a huge amount of vacation time.

Would employees of this company be entitled to payment for unused vacation and sick days when the company closes its doors? The company is in rural Missouri.

If the owner’s heirs refuse to pay any accrued vacation or sick leave, do the employees have a cause of action or are we simply out of luck?

Thanks.

Another option that you may not have considered: the former owner was aware that the company had very high turnover, and few employees (other than his relatives) would remain for even 5 years, let alone 10 or 20, to accumulate excessive vacation time.

There is no Missouri law that employers must pay accrued vacation upon termination. There is almost no state where employers must pay accrued sick time upon termination. A useful brochure issued by the state of Missour is at http://www.mouitax.com/ls/brochures/29-AI.pdf.

If the employer has a policy of paying earned vacation upon termination, Missouri employees are free to pursue the matter in court. The Missouri Department of Labor and Industrial Relations does not participate in such suits.