Employers are free to set the terms by which employees earn paid time off such as vacation, sick and personal leave. Employee handbooks should spell out exactly what it takes to earn time off—and what happens when an employee resigns or is fired.
For example, it’s common to allow departing employees to collect unused leave only if they terminate on good terms or are downsized; there’s no payout if they are fired for dishonesty or safety violations.
Make sure you spell out the limitations, or you may end up stuck paying for accrued time when you discharge an employee for serious problems, such as a failed drug test. That’s what happened in one recent case.
Recent case: John Lang was a production supervisor with no disciplinary or attendance problems. Concerns about possible drug dealing among employees led the company to invoke its right to administer drug tests.
The company’s written policy allowed termination for positive drug or alcohol tests. It also had a policy that said it would not pay accrued leave if the employee was terminated for “gross misconduct”—a term it never defined.
Lang was fired after testing positive for marijuana and cocaine. When he didn’t get paid for accrued vacation time, he sued.
The Court of Appeals of Ohio said that since there was no evidence Lang sold or distributed drugs at work or had engaged in other wrongdoing, he wasn’t guilty of gross misconduct. Therefore, it ruled, he hadn’t forfeited his accumulated leave under the terms of the employer’s policies. (Lang v. Quality Mold, No. 23914, Court of Appeals of Ohio, 2008)
Final note: Have an attorney review your employee handbook to make sure the language is flexible but strong enough to accomplish your goals.