Employers are free to set the terms by which employees earn vacation leave. But what happens to that leave when employees resign or are fired?
Don’t leave that answer open to interpretation—by your employees or a court.
Employee handbooks must spell out exactly how much leave employees earn and how much—if anything—they can cash out when they depart.
Example: It’s common to allow departing employees to collect unused leave if they depart on good terms or are downsized. There’s no payout if they’re fired for dishonesty or safety violations.
Make sure your policy spells out those disqualifying factors.
Recent case: An Ohio manufacturer’s handbook said employees would forfeit their unused vacation leave if they were fired for “gross misconduct.” The handbook didn’t define gross misconduct.
When supervisor John Lang tested positive for cocaine and marijuana, the company fired him. It refused to pay his accrued vacation leave, saying the failed drug test equaled gross misconduct. Lang sued to collect his vacation leave.
Since the handbook didn’t define gross misconduct, it was left up to the court. The court said that since there was no evidence Lang sold drugs, he wasn’t guilty of gross misconduct. (Lang v. Quality Mold, No. 23914, Court of Appeals of Ohio)
Bottom line: Lang got the payout; the company got the lesson: If you want illegal drug use or some other reason to disqualify employees from earning vacation-leave payouts, make it clear in your policy.
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