Ex-Worker Sues For Unused PTO: Does Company Have to Pay?

For some employees, unused PTO 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 PTO can implicate a significant figure. So must the employee be paid for that time?

A decision from the First Circuit confirms that in Vermont, employees are not entitled to be paid for unused PTO 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).

Company Intranet Explains Loss of Unused PTO

In an offer letter, HP told White that he would be subject to company PTO policies 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 PTO 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” for any unused PTO. There were exceptions, but none applied to White.

White worked for HP for about two years before he voluntarily resigned.

Show Me the Money

White asked HP when he would be receiving his pay for his accrued but unused time. In a memo, HP directed White to an intranet page that explained his unused days were forfeited.

White filed a lawsuit against HP, asserting his entitlement to payment for unused PTO.

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.

Appeals Court Backs Decision

The First Circuit affirmed the lower court’s ruling, explaining that the statutory provision relied upon by White did not supplant the plain language of his employment agreement with HP.

The case is White v. Hewlett-Packard Enterprise Co., No. 19-1696, 2021 WL 118012 (1st Cir. 1/13/21).