Laid-off employee must be paid for unused vacation time

An employee who was laid off from his job is entitled to be paid for any earned but unused vacation time, according to the state Supreme Judicial Court. A longtime employee was laid off by Electronic Data Systems, and didn’t receive any vacation pay even though he had only used one day of vacation all year, and the company had a written policy saying that employees were entitled to a certain amount of vacation time based on how long they had worked for the company.

EDS also had another policy that said if an employee was laid off, he or she forfeited any unused vacation time. But the court said this policy violated the state Wage Act, which requires that laid-off employees be given any pay they have earned up until their last day of work.

Because EDS gave its employees paid time off, payment for the time off is part of an employee’s wages, and it must be paid when the employee leaves.

Two important things to note:

  • The law doesn’t require companies to provide paid vacation. But if they do, they have to pay departing employees the vacation pay they have earned.
  • A company can require employees to use up their vacation days by a certain date or else forfeit them. However, the company must give employees a fair chance to use them; it can’t simply require employees to forfeit them if it lays them off.
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