Summertime Means Vacation – Is Your Vacation Policy Compliant?

It’s summertime in the U.S., school’s out, and employees are heading off to visit family, the beach, mountains, national parks, and everywhere else, which means it’s a good time for employers to review their vacation policies and practices.

No federal or state laws require U.S. employers to provide employees with any vacation time, either paid or unpaid. However, most employers do so, whether as a matter of policy or as required by a collective bargaining agreement or individual contract with employees, in order to be competitive, to prevent employee burnout, and to maintain morale.

Most employer vacation policies address how employees accrue vacation, when vacation may be used (such as, for example, prohibiting employees from taking vacation during peak workload times or when a certain number of employees are already scheduled to be on vacation), and how much vacation can be taken at one time. These policies also frequently address what happens to accrued but unused vacation time, and whether unused vacation will be paid to the employee at the end of the employment relationship.

Although there is no legal requirement to provide vacation, many states have adopted laws that apply to vacation policies and practices for those employers that choose to offer vacation benefits.

For example, some states treat earned paid vacation as wages for purposes of their state wage payment statutes, and therefore require that employers pay out earned vacation at the end of employment, or otherwise place limits on an employer’s ability to implement a “use-it-or-lose-it” vacation policy.

Other states only require payment of accrued but unused vacation if the employer has a policy or practice of doing so. And most if not all states’ anti-discrimination statutes prohibit employers from discriminating against employees in how they grant or permit the use of vacation benefits.

Because the states have many different laws and regulations impacting vacation policies and practices, including whether paid vacation constitutes wages for wage payment purposes, whether “use-it-or-lose-it” vacation policies are prohibited, and requirements for the payment of accrued, unused vacation to employees at termination, we suggest you take an opportunity to make sure your vacation policies are compliant with state law before those laws rain on your summer BBQ.

We’re happy to help.