Q. A former employee is demanding pay for her unused vacation and sick leave. Must we pay her?
A. The North Carolina Wage-and-Hour Act mandates that accrued but unused vacation leave benefits be paid to a former employee, unless the employer has a written policy, communicated to its employees, that provides that employees forfeit vacation benefits upon termination.
Neither the act, the governing regulations nor North Carolina courts have addressed whether this statute might apply to sick leave as well. However, that might not stop a reviewing court from requiring you to pay accrued but unused sick leave to a former employee.
To avoid this possible risk, make sure your policies carefully and clearly distinguish between vacation and sick leave. If you sometimes allow employees to use sick leave for vacation purposes or use vacation leave to tend to health issues, a court could decide to lump those leaves together, ruling it all to be vacation leave covered by the act.
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