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 the payout of accrued, but unused, vacation time at termination of employment.
Under Michigan law, an employer must pay fringe benefits, including vacation, according to the terms of the employer’s written policy (MI Stat. Sec. 750.353a and Sec. 408.473).
If an employer’s written policy states that accrued, unused vacation will be paid on termination, the employer must pay for the unused time when employment terminates. The written policy may not be changed retroactively with respect to fringe benefits already accrued by an employee.
An employer will not be legally obligated to pay an employee for accrued, unused vacation time if the employer’s policy does not address the issue.
For additional information on final wage payments, please see the Paychecks
Clear policy language will control. Therefore, when state law does not expressly require employers to provide vacation or to pay out accrued vacation upon termination, employers should assume that their established policy will control.
For this reason, employers must ...