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.
In Minnesota, employers must pay earned vacation time under the terms of any agreement with employees, such as a collective bargaining agreement or an employee handbook. The law defines “wage supplements” as including vacation pay (MN Stat. Sec. 181.74, subd. 2).
When an employee leaves a 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 ...