March 7, 2017
A common question I get is whether an employer must pay an employee for their accrued but unused vacation when they leave employment. If an employee has left under difficult circumstances, such as an involuntary discharge, there can easily be a dispute about post-employment issues like this.
Under Ohio law, accrued vacation is considered an earned benefit that the employee has a legal entitlement to. Therefore, an employee’s right to pay for vacation that was not used during employment will normally survive the employee’s termination or resignation, and payment will be owed.
I say “normally” because an employer can change this through a written policy that is clearly communicated to employees, in an employee handbook or otherwise. If the employer promulgates a policy stating that any unused vacation pay is forfeited when employment ends, that policy is legally enforceable, notwithstanding the general rule.
Employers should carefully consider whether to have a blanket policy like that, however, as it can lead to some harsh results. And some employees who are planning to quit, being aware that their vacation pay will be lost when they leave, will simply take their vacation right before they resign – and quit without notice as soon as they return.
For some employers, a sensible middle ground may be to have a policy stating that vacation pay is forfeited only under certain circumstances – such as if an employee is discharged “for cause,” or if she or he leaves without giving two weeks notice.
Please contact us to discuss what makes the most sense for your business, or if you have questions about you right to vacation pay.