By Darren M. Sharp |
One of my good friends runs a small non-profit that provides “unlimited” paid time off for its employees. Of course, there are limits in that the organization’s employees must get their work done and their absences must not hurt the organization; otherwise, the employees can take off as much time as they like. While few employers give unlimited time off, the idea has caught on with a number of companies. Netflix, Virgin Group, LinkedIn, and GE have all implemented policies that allow for unlimited paid time off for at least segments of their workforce. One of the draws to a policy like this is that the employer has no obligation to pay for accrued, but unused, vacation days at the end of the employment relationship.
Vacation Pay is Contractual in Minnesota
In Minnesota, an employer’s obligation to actually pay for an employee’s accrued vacation days upon termination of employment is wholly contractual. In 1994, the Minnesota Court of Appeals explained that “an employer is obligated to provide vacation pay when employees have met the vacation pay eligibility requirements.” Brown v. Tonka Corp., 519 N.W.2d 474, 475 (Minn. Ct. App. 1994). The Court continued:
It is beyond dispute that an agreement to pay vacation pay to employees made to them before they performed their services, and based upon length of service and time worked, is not a gratuity but is a form of compensation for services, and when the services are rendered, the right to secure the promised compensation is vested as much as the right to receive wages or other form of compensation.
Id. Thus, the court said, once you earn the vacation, you are entitled to the pay. For several years, the courts followed this precedent.
Pay Attention to Your Offer Letter
In 2010, however, in Roberts v. Brunswick Corp., the Minnesota Court of Appeals backed away somewhat from its holding in Brown. 783 N.W.2d 226, 229 (Minn. Ct. App. 2010). In Roberts, the court held that an employer’s disclaimer in its employee handbook—claiming that the handbook was not intended to create a contract—prevented the employee from having a contractual right—based on the handbook—to compensation for the employee’s unused vacation. In other words, since an employer’s obligation to pay for unused vacation days is “wholly contractual” and the handbook warned that it could not be relied upon as a contract, the employee had no contractual right to vacation pay.
For many employees, this means that whether they have a right to compensation for accrued, but unused vacation days will ultimately depend on what an employee’s offer letter or contract states, what the employer’s handbook states about vacation pay, and even how the employer has treated other employees when their employment ended. If you have questions regarding your right to vacation, vacation pay, or other compensation and benefits from your employer, please contact us. We would be happy to discuss these issues with you.
Darren M. Sharp is a senior attorney at Schaefer Halleen, LLC, where he represents clients primarily in employment law, condominium law, and other litigation. In the employment law field, Darren concentrates his practice on discrimination, sexual harassment, and retaliation claims with a portfolio of clients ranging from manual laborers to senior corporate executives. He also regularly enforces medical leave rights and protects from retaliation employees who refuse to engage in illegal conduct or who report such conduct. Another principal focus of his practice is analyzing and providing advice regarding employment contracts, non-compete agreements, and severance agreements.