For some employees, unused vacation time can really pile up.
So when an employee leaves and is sitting on a big number of unused hours, the question of whether that employee is entitled to be paid for the unused time can implicate a significant figure. So must the employee be paid for that time or not?
A new decision from the First Circuit confirms that in Vermont, employees are not entitled to be paid for unused vacation time if their employment contract clearly says payment is not due upon separation.
The case involved Matthew White, a Data Center Architect for Hewlett Packard Enterprise Co. (HP).
Offer Letter Specifies Terms
In an offer letter, HP told White that he would be subject to company policies relating to vacation time if he took the job. The letter also included a link to a benefits page on HP’s internal intranet
In turn, the benefits page specifically said the company’s vacation program did not include a year-end carryover feature or payout provision upon separation. In underlined text, it said any time not used by December 31 would be lost, subject to limited exceptions.
For good measure, a separate heading, titled “If you leave HP or go on disability leave,” said, “If you leave HP for any reason, either voluntary or involuntary, you will not receive pay in lieu of unused vacation.” There were exceptions, but none applied to White.
White worked for HP for about two years before he voluntarily resigned.
Show Me the Money
Assuming he was entitled to it, White asked HP when he would be receiving his accrued but unused vacation time. HP responded to him with a memo directing him to an intranet page that explained his unused days were forfeited.
White filed a lawsuit against HP, asserting his entitlement to payment for unused vacation time. He also said he was owed a bonus payment.
In support of his lawsuit, he relied on a Vermont statute that says, “Whenever the terms of employment or the employer’s established practice includes provisions for paid vacations, vacation pay on cessation of employment has the same status as wages earned.”
A federal district court ruled for HP, finding the statute did not displace the terms of White’s employment agreement. It also rejected White’s quantum meruit and unjust enrichment claims related to bonus pay, again based on the terms of the employment agreement. White filed an appeal.
Appeals Court Backs Decision Below
The First Circuit affirmed.
The court rejected White’s argument that under Maine law his unused vacation time had the same status as wages earned. Relying on an earlier decision from Maine’s highest court in a similar case, it held that the statutory provision relied upon by White did not supplant the plain language of his employment agreement with HP.
As to the bonus, the court said White was seeking a bonus payment relating to a time period when the relevant bonus program was not in effect. It rejected White’s theories of recovery, pointing out that unjust enrichment is reserved for situations in which there is no contractual agreement between the parties.
The case is White v. Hewlett-Packard Enterprise Co., No. 19-1696, 2021 WL 118012 (1st Cir. 1/13/21).
