Q. My employee is not working out after 30 days. What are my obligations to pay him for unused vacation time when we let him go?
A. Assuming vacation time is provided, the answer to the
question regarding the payment of unused, accrued vacation time
upon termination depends entirely on state law. NH law requires
that an employer pay all wages due at the time the wages are due
and owing. Wages include vacation pay, severance pay, personal
days, holiday pay, sick pay, and payment of employee expenses, when
those benefits are a matter of employment practice or policy, or
both. When benefits are a matter of policy, NH law requires that
the employer make available to employees in writing, or through a
posted notice maintained in an accessible place, employment
practices and policies regarding vacation pay. In addition,
employers must provide employees with a written or posted detailed
description of employment practices and policies related to paid
vacations, holidays, sick leave, bonuses, severance pay, personal
days, payment of employee expenses, pension and all other fringe
benefits, and maintain on file a signed copy of the
notification.
In order to understand whether the employee is entitled to pay out
of vacation time, we will need to know the answers to the following
questions: How do employees accrue vacation – all at once or
gradually? What does the policy say about pay out of accrued,
unused vacation when at the end of employment? Have employees been
provided with written notice of the policy? What does the offer
letter state regarding vacation time? Regardless of the written
policy, how have terminating employees been treated in the
past?
The written policy will likely dictate the result, however company
practice could change the result if it is inconsistent with the
policy. If the employee received a written vacation policy that
stated that no employees are paid out for accrued, unused vacation
at the termination of employment and the employer can show that the
employee received notice, then the employee is not entitled to a
payout. If there is no written policy, or if the employee believes
that employees are paid for accrued, unused vacation at the end of
employment, then the NH DOL will look to the company practice. The
company should keep sound employment records to enable it to show
that it adheres to its written vacation policies or
practices.
Best practice? Companies should decide and define the policy in
regard to accrual, roll over and payout of unused vacation upon
termination of employment. The policy should be given to all
employees upon hire, who sign an acknowledgment of receipt kept in
their personnel files. Most importantly, management must follow its
policy or its practice will win the day.
Published in the Manchester Union Leader - July 2015
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.