No Minnesota law requires private sector employers to provide employees with vacations, paid or unpaid, but most employers do offer some version of vacation. It is important for employers to remember that if they “promise” paid vacation, they may be legally bound to provide it; that a promise may bind an employer as much as a formal employment contract.
Employers must pay earned vacation time under the terms of any agreement with employees, such as a collective bargaining agreement or an employee handbook. (MN Stat. Sec. 181.74, subd. 2 defines “wage supplements” as including vacation pay.)
When an employee leaves the job, the question of payment for vacation time will depend on what the employer has established as eligibility requirements for vacation. If the employee has satisfied the eligibility requirements and has accrued vacation, but has not used it, the employee must be paid for the time upon termination. Agreement to pay vacation pay if employees meet a certain eligibility standard in terms of time worked is “not a gratuity but is a form of compensation for services, and when the services are rendered, the right to secure the promised compensation is vested as much as the right to receive wages…” according to the Minnesota Court of Appeals (Brown v. Tonka Corporation, 519 NW2d 474 (1994)).
Minnesota's highest court has determined that vacation benefits are "wholly contractual." Based on the terms of an employee handbook or policy, the court held that employers may lawfully refuse payment of personal time off (PTO) to an employee who was terminated for misconduct (Lee v. Fresenius Medical Care, Inc., 741 NW2d 117 (MN ...