Can we refuse to pay out accrued vacation if employee suddenly quits?
Q. Our company policy is not to pay an employee for unused vacation time if the employee resigns without giving the required two weeks’ notice. A former employee has challenged this policy and is threatening to take the company to court. Is this policy lawful?
A. If you have a written policy that clearly states that employees will not be paid for accrued but unused vacation if they do not give proper notice, then, under Minnesota law, your company can lawfully refuse to pay the employee for his or her unused vacation.
However, Minnesota courts have stated that an employee’s right to be paid for vacation time can be contractual. This means that if the employee brings a legal claim, the court would look at the language of the company’s policy. Any ambiguity in the policy language would be interpreted in favor of the employee.
Therefore, it’s a good idea to make sure your policy is absolutely clear.
If you want to adopt a “use-it-or-lose-it” policy, have your attorneys review the language to make sure it complies with the latest Minnesota case law.
In addition, the law on this issue varies in different states. If your company has operations outside of Minnesota, you will need to make sure that your operations in other states are lawful.