Human Resources News & Insights

Should you pay staff for accrued vacation after they’re fired?

Are you obligated to pay out a staff member’s accrued vacation time when they leave or are fired?

Check out this recent case:

Linda Broadstock worked at Elmwood at the Springs Health & Wellness Campus in Ohio.

After a HIPAA violation, Broadstock was asked to leave the facility. She reported that the company told her it would pay her for her accrued vacation time. The director of HR said that offer never occurred.

Broadstock was rehired, and then, sometime later, terminated for a separate incident.

By the time she was fired, Broadstock had 73.896 hours of vacation. So she sued Elmwood, seeking payment for the unused vacation time.

The court turned to the company’s policy, which read:

When a team member leaves Elmwood, all accrued vacation time is paid to the end of the last pay period provided the team member requests the pay; a two week notice is given and fulfilled; an exit conference has been conducted; all items (keys, uniforms, badges) have been returned; and the team member has not been terminated.

A trial court awarded Broadstock $1,500, and Elmwood quickly appealed.

On appeal, the court said it was clear the company didn’t owe Broadstock any accrued vacation time because she’d been terminated. Case closed.

What the law says about accrued vacation

The ruling seems fairly straightforward, but the takeaway is this: Paying out accrued vacation time depends on:

  • what your state’s rules are, and
  • what your company policy is.

Check your state laws to see what is required of your company and at what rate you might have to pay out extra vacation time.

Jon Hyman, writing on the Ohio Employer’s Law Blog, believes a policy completely denying terminated staffers their accrued vacation pay isn’t a wise idea. (And white paper from the California Chamber of Commerce recently said it was one of the nine HR mistakes most likely to get you sued.) Instead, firms should:

“consider limiting vacation and other paid time off forfeitures to “for cause” terminations. In that case, you won’t benefit employees who lose their jobs through their own misconduct, but you also won’t be punishing employees who lose their jobs through no fault of their own (i.e., downsizing, restructuring, etc.).”

The case is Broadstock v. Elmwood at the Springs.

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