If I am demoted, will my accrued vacation hours be paid at the new lower pay rate?

I have been a supervisor for the last 10 years and have accrued about 500 vacation hours. I was told I am being demoted to line staff effective 11/1/15. If I take vacation time after 11/1/15, or resign after 11/1/15, will my vacation pay rate be at the now lower pay rate or at the supervisor pay rate which is when I earned the vacation time?

1 answer  |  asked Oct 16, 2015 7:24 PM [EST]  |  applies to California

Answers (1)

Marilynn Mika Spencer
This is an interesting question . . . and I don't know the answer to it. The statute, cases, and Division of Labor Standards Enforcement Opinion Letters address situations where vacation was earned at a lower rate than the final rate of pay. Your situation is the opposite.

Accrued, vested vacation is considered wages. The law is clear that wages cannot be forfeited. California Labor Code section 227.3 states:

"Unless otherwise provided by a collective-bargaining agreement, whenever a contract of employment or employer policy provides for paid vacations, and an employee is terminated without having taken off his vested vacation time, all vested vacation shall be paid to him as wages at his final rate in accordance with such contract of employment or employer policy respecting eligibility or time served; provided, however, that an employment contract or employer policy shall not provide for forfeiture of vested vacation time upon termination. The Labor Commissioner or a designated representative, in the resolution of any dispute with regard to vested vacation time, shall apply the principles of equity and fairness."

Notice the clause in Labor Code section 227.3 that says "all vested vacation shall be paid to him as wages at his final rate . . . ." Payment at your final rate of pay indicates you would be cashed out at the lower (final) rate you were earning at the time of termination.

The statute also refers to vacation "time," which would indicate that what an employee accrues is not an amount of wages, but instead an amount of time. This also indicates the payment would be at the lower rate, because you would be cashing out hours of vacation time.

The statute quoted above is not the only place in the wage and hour laws that reference forfeiture. There are many references throughout the law that wages cannot be forfeited. This, plus the fact that vacation is considered wages, indicates the cash out would be at the higher rate.

Finally, in law, a specific statement controls, or supersedes, a general statement. Under this doctrine, the general policy disfavoring forfeitures would be superseded by the specific statement of "final rate" in Labor Code section 227.3.

Based on the above and 25+ years of legal experience, I anticipate the Division of Labor Standards Enforcement would say that section 227.3's language on the "final rate" would control, and you would be entitled to a cash out at the lower rate.

As I said, I do not know the answer. You can try calling one of the DLSE offices and ask to speak with an attorney, and ask the attorney. I don't know how easy it is to get through, but the DLSE attorneys are generally a good group and I expect you will get through or get a return call eventually.

Another thing you might consider is finding out from your employer what it intends to do in this situation. Do it via e-mail or some other written form so you will have a record. Explain you earned the vacation at the higher rate so you want to confirm that at the time you take vacation or receive a cash out, it will be at the rate you accrued the vacation. Add that it would be unfair to force you to lose it, especially because you are aware that California labor law disfavors forfeitures. See what the employer says.

Good luck!

posted by Marilynn Mika Spencer  |  Oct 23, 2015 04:18 AM [EST]

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