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Jan18

Vacation payout

What are the states requiring a company to payout accrued vacation upon termination of employment?

This is a deceptively complex issue. A number of states including California, Illinois, Louisiana, Maine, Massachusetts, North Carolina, Oregon, Rhode Island, Tennessee and Colorado always require vacation payout at termination.

In other states, this issue is currently being contested in court. Still other states require that the employer will payout earned vacation at termination, unless the employer has a written policy that specifically prohibits it. These states include Indiana, Oklahoma and Wyoming.

And in some states this is strictly a matter of company policy, such as Texas and Florida.

If you have a question about a specific state, feel free to post it.

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This entry was posted on Monday, January 18th, 2010 at 1:33 pm and is filed under
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6 Responses to “Vacation payout”

  1. Tabitha Says:

    Which states allow you to take away vacation accrual for active employees? You address termination payment, does the termination rule also apply payout to current employees as well?

  2. Caitlin Says:

    Hi Tabitha! No, this does not apply to current employees. Some of the states that require payout at termination (such as Illinois) would permit the employer to change vacation policy by reducing the earned vacation for current employees. This would be illegal in California and perhaps a few other states. HTH, and thanks for reading the blogs!~ Amelia

  3. James Says:

    I worked with a company that was based in New Jersy when I started, and now is based in Colorado. I left this company with some vacation time left, when I got my paystub I noticed an extremely large amount of federal tax witheld. That seemed strange, and called about it and was told that fed required that on vacation payouts, about 25%. Is this correct.

  4. Caitlin Says:

    Hi James! Yes, this is correct. Under federal law, any payment over and above your usual wages and salary, such as a vacation payout, is taxed at a higher rate, like a bonus. This may increase your tax refund in 2011, but unfortunately that does not help you now. HTH, and thanks for reading the blogs!~Caitlin

  5. Manu Says:

    What laws exist concerning this issue in Washington State?

  6. Caitlin Says:

    Hi Manu! If the Washington employer has a policy of paying unused vacation at termination, the state labor agency will enforce that policy. However, if the employer has not promised to do this in the past, they are not obligated to start now. HTH, and thanks for reading the blogs!~Caitlin

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