Massachusetts Employers must pay Accrued but Unused Vacation at the time of Discharge

posted by Neil Klingshirn  |  Nov 21, 2009 09:23 AM [EST]  |  applies to Ohio

The Massachusetts Payment of Wages Act defines “wages” to include “any holiday or vacation payments due an employee under an oral or written agreement.” The Wage Act requires employers to pay discharged employees in full on the day of discharge. An employer may not lawfully restrict or limit an employee’s right to vacation payments.  Electronic Data Systems Corp. v. Attorney General, No. SJC-10260, Massachusetts Supreme Judicial Court (June 11, 2009).

In EDS,the employer's vacation policy stated that employees accumulate paid vacation time based on the number of calendar years they worked. However, the policy stated that “vacation time is not earned and does not accrue. If you leave EDS, whether voluntarily or involuntarily, you will not be paid for unused vacation time (unless otherwise required by state law).”

The Massachusetts Supreme Court found that this policy contradicted itself on whether an employee "earned" vacation time. Since the employer based vacation pay on the number of hours or years the employee “ha[s] worked,” the Court ruled that paid vacation was earned. The court concluded that where an employee is entitled to vacation pay under the terms of an employment agreement, the entitlement is another form of compensation, which must be paid in full when the employee is discharged.

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posted by Neil Klingshirn  |  Nov 21, 2009 09:23 AM [EST]  |  applies to Ohio

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