A group of Massachusetts nursing homes in Norwood, Braintree and Waltham found out the hard way when a former employee filed a complaint in January 2013 that she was not paid earned vacation time upon termination. The investigation extended to other nursing homes across the state, and investigators found that 209 employees were denied earned vacation wages at four nursing homes. Under the terms of the settlement, the nursing homes agreed to pay restitution totaling more than $132,000 to all 209 former employees along with penalties to the Commonwealth.
This is a cautionary tale that failure to pay earned vacation time is a violation of Massachusetts Payment of Wages Law. Some employers believe they can refuse to pay earned vacation pay or establish a policy that requires employees to forfeit earned vacation time. On the contrary, vacation time is treated like wages under Massachusetts law, and more often today, former workers are bringing lawsuits for unpaid vacation time. Because the penalties for failing to pay wages are severe, employers must be well versed in Massachusetts laws that govern what they must pay and when. The vacation issue is so problematic that the Massachusetts Attorney General issued guidance on the subject.
What an Employer Can and Can’t Do
Although employers are not required to grant vacation time, vacation time accrued or earned “under an oral or written agreement” with the employer is treated like wages under Massachusetts law. When an employee separates from his/her employer, the company must determine how many vacation days are accrued and unused. It must make wage payment in lieu of these vacation days when it makes final payment of wages to the worker.
Under Massachusetts law, an employer can:
- cap the amount of vacation time an employee may accrue or earn
- implement a “use it or lose it” policy that requires employees to use all of their accumulated vacation time by a certain date or forfeit all or part of it
- have a policy that allows the employees to “carry over” a certain number of hours of vacation time after the period for using the vacation time has expired
In the end, to avoid vacation pay controversies, every employer should have a clearly written vacation policy.
Let us know if you need any assistance updating your current vacation/PTO policy. By using HR Knowledge’s team of experienced HR advisors, we can assist you in updating and customizing the policies and procedures for your organization that will help your organization comply with federal and state legal guidelines. Please contact us at HR@hrknowledge.com if you are interested in learning more about our HR services..