This Wisdom of the Crowd, compiled from questions and responses posted on the Employment & Labor Law Forum,* addresses companies that permit advanced vacation and retrieving negative vacation balances from employees that leave the company.
*(Permission was received from the ACC members quoted below prior to publishing their eGroup Comments in this Wisdom of the Crowd resource.)
Question:
We are deciding if we should advance vacation and if so, how to handle employees who leave the organization with negative vacation balances. Given that some states strictly regulate what can be deducted from an employee's paycheck, or only allow deductions with written acknowledgment made at the same time that the deductions are made (as opposed to referring back to a previously signed handbook), how have you handled advancing vacation concerning non-exempt employees?
Does your company allow employees to borrow unearned vacation?
If so, how many days/hours do you allow to be advanced/borrowed?
How do you handle employees who leave with negative vacation balances?
If you deduct from final pay and you are a multi-state employer, can you describe how you recover? For example, do you:
- Deduct without written notice?
- Include a notation in handbook/policy that negative vacation balances will be deducted from final pay?
- At the time of deduction, do you ask employees to sign an acknowledgment that negative vacation balances will be deducted from their final paycheck?
- Do you take different approaches depending on the state?
Wisdom of the Crowd:
Response # 1: We allow employees to use all of their annual allotment even if not yet accrued with manager approval. If they attempt to do so early in the year, the manager and Human Resources will have a discussion to ensure that they are aware that they may not have time later in the year. Employees who voluntarily resign will have negative balances subtracted from their pay. We clearly advise employees of this in the Handbook which is (1) distributed to all new employees with their offer letter and (2) posted on our Intranet. Every time an employee puts in for unaccrued time in the Human Resource Information System, a pop-up appears requiring them to agree that negative balances for used but unaccrrued time can be taken from their last pay if they leave. For employees who are terminated involuntarily, it is prudent to not attempt to seek repayment of negative balances. It is my experience that employees are more likely to go to lawyers when they are "hit in the pocketbook." We are a multistate employer and many states have very strict wage payment laws that prohibit deductions of this nature. Therefore, taking such a deduction from a disgruntled terminated employee runs the risk not only of a wage payment claim but other types of claims that a creative attorney may assert. We have not had any complaints by employees as about this practice.
This is our handbook language (Sun Days is our term for Paid Time Off):
"Repayment by employee of Sun Days advances upon termination of employment: Although the Sun Days allotment is accrued throughout the year, employees may be able to use their entire Sun Days allotment, subject to the approval of their manager or supervisor (except for emergencies or under other circumstances protected by applicable law), as discussed above in Scheduling of Sun Days. Subject to applicable law, by exercising the privilege to take Sun Days before they are accrued, employees are agreeing that they must repay [Company Name] for such used but not yet accrued Sun Days and also agree that upon termination of employment, [Company Name] may reduce the employee's payroll by the dollar value of the Sun Days used but not accrued. In addition, upon termination of employment, [Company Name] reserves the right (subject to applicable law) to reduce an employee's payroll by the dollar value of the Sun Days used but not accrued, and the employee expressly agrees to that payroll reduction in consideration of being given an advance of Sun Days not yet earned or accrued."1
Response # 2: We grant employees vacation on an annual basis, so on January 1 an employee is entitled to take their full year's allotment of vacation days at any time during the year, subject to scheduling in advance with their manager. When an employee leaves, we pay out only "accrued" and unused time, which accrues monthly during the year, but if an employee has taken more vacation days than accrued at the time of departure, we do not try to recoup the pay for vacation days taken but not yet accrued for the year.
If you want to limit employees to taking off only days that have accrued, that's fine, but trying to keep track of what days have been "advanced" and then trying to claw back the value of those days if the employee leaves the company before accruing all the advanced days is not worth the effort.
Besides, allowing the use of vacation days during the summer months saves you from having unused vacation days at the end of the year.2
Response # 3: We allow borrowing up to 10 days with prior approval. Notification is provided in the benefits summary that a negative balance will be deducted from final pay and a written acknowledgement is obtained for the deduction at the time of separation.3
1Marjory Robertson, AVP & Senior Counsel, Sun Life Financial, Massachusetts (Employment & Labor Law, March 21, 2017).
2Kevin Chapman, Associate General Counsel, Dow Jones, New Jersey (Employment & Labor Law, March 21, 2017).
3Anonymous Poster (March, 2017).
Region:
United States
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