Fired employee wins suit over unused vacation
July 1, 2009 by Jim GiulianoPosted in: Pay and benefits
For many companies, firing employees just got a little more expensive. Many employers follow a policy of paying out unused vacation time to employees who voluntarily resign — but not when employees are fired.
But that practice has come under scrutiny in some areas. Take this recent case from Massachusetts:
Francis Tessicini was fired from his job at Electronic Data Systems Corp. (EDS). Before the termination, he’d only used one day of his allotted paid vacation — but, according to company policy, he wasn’t owed payment (which would’ve amounted to about $1,800).
He sued, claiming the policy was against the law. The case made it to the Massachusetts Supreme Court, which agreed EDS’s policy violated the state’s Wage Law.
Under the law, vacation is considered part of an employee’s wages, the court ruled, so it was owed to Tessicini along with his regular salary for work he’d completed.
That’s not the law of the land everywhere, though:
An opposite ruling was handed down in 2007 by the Minnesota Supreme Court. Last year, Maryland passed a law clarifying that employers’ individual policies dictate whether vacation time will be paid out after termination.
The rules on payment of vacation time vary from state to state. Make sure you check your state’s laws and write your policy accordingly.
Cite: Electronic Data Systems Corp. v. Attorney General
July 9th, 2009 at 3:13 pm
That’s why it’s so important to have an employee handbook and to have the employee sign off on receiving it and understanding it.
July 9th, 2009 at 4:06 pm
As laws are different in every state, company policies are also different with each company. So unless your Legal Dept works with the State and the company words it correctly and accurately in their policy, more than likely the former employee may win during a lawsuit.
July 10th, 2009 at 11:45 am
$1800 is a nice chunk of change but with the attorney fees incurred, would it really be worth it?!
July 13th, 2009 at 9:08 am
See Lucy – that’s why companies think they can get away with breaking the law. They never think an ex-employee would sue for a mere $1,800. I am sure the employee recouped his legal fees and the company learned an expensive lesson.
September 29th, 2009 at 10:58 am
Our vacation policy states vacation is EARNED during the year (Jan. to Dec.) for every full month worked. So if their seniority would allow them to earn 3 weeks of vacation then each month they earn 1.25 days of vacation. If they leave after 6 months they would have earned 7.5 days of vacation. Regardless of whether they resigned, got laid off or were terminated they would receive the balance of any earned but not used vacation. Because we allow employees to take up to 1 week of vacation prior to earning, the reality is in most cases I have to tell them that they have used more vacation than what they have earned so that time will be removed from their last paycheck. It does add some sting to the exit interview but it seems to be the most fair approach to a vacation policy.
October 5th, 2009 at 1:46 pm
One word……..Handbook!!!!!!!!!!!!!!!!!!