Human Resource Blog

Vacation Pay upon Termination

For the last year because of the economy we have been working under a reduce hours / pay schedule. Saddly lately we ran out of cash and we layoff three employees because we could not continue to pay their salaries. Whe we lay them off, we told them that we will pay their vacations as we get money, but one of them got angry and told us that she want her F&%#@ Vacation Money now and she is treatening to call a lawyer and also she wants a recomendation letter.
Are we obligated to pay her vacation money now? or can we pay her as we get additional cash?

Yes, in any state in that requires vacation pay at termination, it must be paid on the next regular payday after the employees last day of work.

You do not mention which state you are in, and that is an important factor. About a dozen U.S. states require that the employee be paid for earned vacation at termination. In those states, usually the payment must be on the final paycheck for time worked. An employer who withholds or delays paying this amount is in violation of state law. 

Even if the state does not require you to pay employees for earned vacation at termination, if you have a written or unwritten policy of doing so, the employee can take you to court and win.

You would be wise to cut a check for the vacation pay, and to write this person a letter of recommendation — a time honored technique in HR to make your problem employee someone elses problem employee.