In most states, private sector employers are not required to provide vacation, whether paid or unpaid, to employees. Therefore, employers have significant discretion in developing vacation and personal leave policies that best fit the needs of their workplace and employees.
If promised, vacation must be granted. Nonetheless, it is important for employers to understand that, if their practices, policies, or statements rise to the level of creating a “promise” of vacation, then the employer may create a binding legal obligation to provide vacation—even when state law would not otherwise require it to do so.
Payout of vacation at termination. This caution also applies to obligations to pay out accrued, but unused, vacation time at termination of employment.
Even where state law does not specifically require employers to pay out accrued vacation upon termination, a consistent practice, written policy, or contract promising such payment may create an enforceable legal obligation to do so.
In such circumstances, earned vacation will generally be treated as wages pursuant to state wage payment and collection laws.
The Court of Appeals in Alabama has ruled that offered vacation time is a form of compensation for services and that once the services are rendered, the right to the promised compensation is vested just as are wages or other forms of compensation.
If it is communicated to employees, an employer may not unilaterally “revoke [its] vacation pay policy once the employees have performed.” Alabama employers that do not wish to pay their employees for accrued but unused vacation must say so specifically and beforehand.
To be safe, employers should put their policy in writing and distribute it to all employees ...