The Court of Appeal recently upheld an
employer’s policy limiting employees’ vacation benefits. Owen v. Macy's, Inc.(2009) 175 <u1:state w:st="on"><u1:place w:st="on">Cal.
462. The employer’s policy allowed employees to earn vacation benefits
months on the job. However, the benefit vested only twice a year: 50%
and 50% in August--a policy clearly described in Macy's employee
handbook. When the employer terminated employees in April without
paying for unvested vacation time, Plaintiff sued demanding payment.
Courts had previously ruled that
employers cannot adopt “use it or lose it” policies and must, upon
termination, pay employees all earned vacation time. In this case, the court deemed the
unvested vacation time
as unearned and sided with the employer.
For associations with
employees, boards need to review their employee handbooks. When associations give
vacation benefits, their handbook should explain (i) when employees start earning
it, (ii) how it accumulates, (iii) when employees can use it, and (iv) the maximum
vacation that can be accumulated. Once
the vacation time vests, employees are entitled to keep it until used, or until
receiving compensation at termination. To keep costs under control, associations should consider capping
the total amount of vacation time employees can earn.
: Associations needing legal assistance can contact us
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