To Accrue Or Not To Accrue Vacation

February 22, 2013

A client of ours recently spent a great deal of time and money contesting an employee’s claim that he was owed his four weeks vacation after giving his notice on January 10th. Unfortunately, this business owner chose to ignore repeated suggestions that his employees should accrue vacation time and he should put his vacation policy in writing. Although he prevailed in the long run, it was an expensive lesson learned.

The Massachusetts Minimum Fair Wage Law does not require employers to offer vacation pay to employees. However, if an employer does choose to provide paid vacation to their employees it must treat those payments like any other wages under M.G.L. c. 149, s. 148. Withholding vacation payments is the equivalent of withholding wages and is illegal. Employees must be paid for all earned vacation time upon termination of employment.

Employers can protect themselves by adopting and communicating a clear, understandable vacation policy that complies with the law.

Employers may:

• Establish the amount of paid vacation an employee will receive,

• Set specific timeframes when vacations are not permitted based on the needs of the business,

• Develop procedures regarding the scheduling of vacations ie. how much notice an employee must provide, how much time they can take each vacation, and which employees get priority in the event of a conflict,

• Adopt a “use it or lose it” policy

• Set a probationary period before vacation time is earned.

Employers may not:

• Enter into an agreement with an employee that allows the employee to “waive” earned wages or vacation time,

• Make changes to vacation time policy “retroactively”.

• Withhold earned vacation time from an employee for any reason upon termination.

BizChecks Payroll strongly recommends to all of our clients that they establish a written vacation policy, adopt a weekly or hourly vacation accrual system, and publish these accrual amounts on employee pay stubs. Many companies are now also requiring their employees to acknowledge in writing upon hiring that they understand the vacation policy.