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Do we have to pay fired employee for accrued but unused vacation time?

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in Compensation and Benefits,Firing,Human Resources

Q. We recently fired an employee for misconduct. She now claims we have to buy out all the vacation time she had not used. Do we have a legal obligation to pay her for accrued and unused vacation time?

A. The answer is, it depends. In Minnesota, ­employers are not legally obligated to provide vacation time with pay, nor are they required to pay employees for ­vacation time they accrue but do not use.

However, if you have a written policy regarding time off with pay, Minnesota courts will enforce your policy. If your policy states that employees will be paid for accrued but unused vacation time at termination, and doesn’t limit this in any way, then your former employee is probably right.

But if your policy is clear that employees who are terminated for misconduct are not eligible to receive a payout for vacation time, then you can follow your policy.

If you do not have a written policy, the situation is murkier. The safest bet would be to follow past practice. If you have never paid out vacation time to employees fired for misconduct, there doesn’t appear to be a reason to treat this employee any differently. If you always paid accrued but unused vacation time on a terminated employee’s last paycheck, no questions asked, you should probably swallow hard and pay it to this employee, too.

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