Unpaid Vacation Time

Our firm recently resolved a case in which the employee had built up almost $30,000.00 in unpaid vacation time. The employer refused to pay the unpaid vacation time funds to him when the employee left the company. We settled the case for $65,000.00.

Some employers combine vacation and sick leave plans into a “paid time off” (PTO) policy. These paid days off can be governed in the same way as vacation policies alone. Whenever the employment relationship ends, if you have not used all of your earned and accrued vacation or “paid time off,” the employer must pay you at your final rate of pay for all of your earned and accrued unused days, unless there is a written policy that clearly explains how your earned vacation can be taken away.

If your employer does provide for vacation pay or PTO, your employer must have a written policy which clearly explains how the time is earned and how it can be taken away. Pursuant to North Carolina vacation pay laws, your earned vacation time or PTO are considered wages, and the vacation time is earned, or vests, as labor is performed.

For example, if you are entitled to four weeks (20 work days) of vacation per year, after six months of work, you will have earned 10 days of vacation. Vacation pay accrues as it is earned, and should not be forfeited, even upon termination of employment unless the policy has a provision to the contrary. Unlike “sick pay,” the North Carolina Department of Labor takes the position that vacation pay needs to be paid upon termination unless there is a written policy that states that vacation pay will be forfeited. Such unused vacation should be paid to you at your final rate of pay.

Employers can place restrictions on vacation benefits that prevents you from earning vacation over a certain amount of hours. Further, employers can provide specific periods of time at the beginning of employment during which you do not earn any vacation or PTO benefits. Unlike some states, an employer’s vacation policy can provide that all accrued vacation hours not used by the end of the year will be forfeited.

As with commissions and bonuses, vacation pay or PTO are considered wages. Not paying an employee their wages can have a significant impact on their family’s well being. Therefore employees who have unlawfully had their vacation pay or PTO withheld may be entitled to liquidated damages (“double damages”). We usually handle North Carolina vacation pay laws cases on a contingency basis, meaning no attorney fees are owed unless we recover compensation for you. Maginnis Howard handles such cases throughout North Carolina.