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When terminating or laying off employees, be sure to pay out accrued leave

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in Compensation and Benefits,Human Resources

California wage-and-hour law requires employers that provide vacation benefits to pay out unused vacation immediately upon termination. However, there’s an exception for union workplaces if the employer and union clearly and unmistakably agree to waive that payment.

Recent case: Howard and several other Celite Corp. employees sued when the company didn’t immediately pay out vacation time after they were laid off.

The employer retroactively calculated earned leave by adding up hours worked in the previous year to come up with how much leave an employee would earn the next year. Howard was paid out based on the previous year, not what he would have earned going forward.

The company argued it didn’t owe Howard and the other em­­ployees anything more because the union had agreed to pay for accumulated vacation time based on the previous year.

But the court ruled the union waiver was not clear and unmistakable. Therefore, it said, the em­­ployees were due more vacation pay based on the current year. (Choate v. Celite, No. B239160, Court of Appeal of California, 2nd Appellate District, 2013)

Final note: Missteps on vacation payouts can be costly. Nonunion em­­ployers that fail to immediately pay out accrued vacation face payment of up to 30 days’ wages.

That’s because the law requires immediate payment of outstanding wages—and vacation pay counts as part of those wages.

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