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Clarify your vacation policy or cough up extra pay

by on
in Firing,Human Resources

Now's a good time to carefully review your policy on whether employees receive pay for unused vacation time when they depart your organization.

Pay special attention to describing whether your policy applies to all cases of separation (i.e., firing, resignation, layoff) or just certain situations.

As a recent case shows, if your vacation-pay policy appears ambiguous, courts will likely interpret it in favor of employees.

Recent case: When EDS fired Robert Hutchins, the company refused to pay him for his four weeks' worth of unused vacation time. It cited a written Q&A policy that read: "What if I leave EDS? Can I get paid for any unused vacation?" The policy's answer: "If you leave the company, you do not receive vacation pay for unused vacation time."

At issue: What did the phrase "leave the company" mean?

Hutchins filed a lawsuit, saying employees believed that "leave" only referred to voluntary resignations, so he should be paid for unused vacation time.

The company countered, argued that "leave the company" referred to any type of separation (firing or resignation), so the policy should block any payment of unused vacation time.

Result? The court sided with Hutchins, saying that because the policy was too vague on who should be paid for unused vacation time, the employee must win. (Electronic Data Systems Corp. v. Attorney General, No. SJC-08927, Mass. Sup. Jud. Ct., 2003)

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