Although no Tennessee law requires private sector employers to provide employees with vacations, paid or unpaid, most employers do offer their employees some version of vacation. Thus, it is important for employers to remember that if they “promise” vacation, they may be legally bound to provide it--and that a binding promise does not require embodiment in a formal employment contract. Tennessee courts have ruled that, under some circumstances, an employer's assurance of paid vacation time, whether made in an employee handbook, or given orally, or simply understood as a matter of common practice, may constitute an implied contract, which is binding and enforceable.
Employers are free to devise their own system for vacation accrual. There are several different commonly used options:
• Upon completion of a 6-month or 12-month period
It is important to be clear and unambiguous when drafting such policies. If the policy is intended to ensure that employees work the entire accrual period to earn their vacation days, it should state clearly that employees will not be entitled to pro rata payment if they leave partway through the period. Remember that any vagueness in the policy is likely to be construed against the employer.
According to an opinion issued by the state Attorney General, state law does not require that an employee's final compensation paid at termination include vacation pay, unless the employer's policy or its labor agreement specifically requires compensation of unused vacation pay upon termination (TN Atty. Gen. Op. 06-169 (Nov. 13, 2006)), citing (TN Code ...