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U/3 mA5?./IG/.^;/n> 31EDbb D27E T051 D commonwealth of Massachusetts vs AN ADVISORY ON VACATION POLICIES 99/1 Attorney General Thomas ReiifK> F. ^ y>% v Of,, % %y tys Office of the Attorney General Fair Labor and Business Practices Division MA 200 Portland Street - Boston, 02114 (617)727-3465 September 7, 1999 ADVISORY 99/1 An Advisory from the Attorney General's Fair Labor and Businesss Practices Division on Vacation Policies Pursuant to G.L. c. 23, § 1(b), the Attorney General issues the following advisory: VACATION POLICIES Vacation Payments Are Wages Employers who choose to provide paid vacation to their employees must treat those payments like any other wages under G.L. c. 149, § 148. £££ Massachusetts v. Morash. 490 U.S. 107 (1989). Like wages, the vacation time promised to an employee is compensation for services which vests asthe employee's services are rendered. Upon separation from employment, employees must be compensated bytheiremployers forvacation time earned "underan oral orwritten agreement." G.L. c. 149, § 148. Withholding vacationpayments isthe equivalent ofwithholding wages and, as such, is illegal. Employers may establishtheterms ofemployment and determine the hourly rate or salaryto be paid aswell as howmany hoursthe employee is expected to work. Employers may likewise establishthe amount ofpaid vacationthe employee will receive and/ora specific time of the yearwhen the employee cantake avacation, depending onthe needs or demands ofthe business. Employersmay establish proceduresregardingthe scheduling ofvacations; (i.e., whetheremployees mustnotifythe employers astotheir intentto take vacation, when they intendto take it, andhowmuch vacationtime they plantotake.) No Forfeiture ofEarned Vacation Time General Laws c. 149, § 148 provides that no employer shall "by special contract with an employee or by any other means exempt himself or herselffrom the statute or from its penalty provision in Section 150. Since the statute provides for the timely payment ofall wages earned, an employer may not enter into an agreement with an employee under which the employee forfeits earned wages, including vacation payments. Examples ofthese agreements are vacation policies that condition the payment ofvacation time on continuous employment orthat require that employees provide notices to quit. Employees who have performed work and leave orare fired, whether for cause ornot, are entitled to pay forall the time worked up to the termination of their employment, including any earned, unused vacationtime payments. Generally, time earned underany vacationpolicy need be compensated only withthe equivalenttime off. The exception is where an employee separates from employment orwhere an employee agrees to receive monetary compensation in lieuofvacation time. Accrual ofVacation An employermay capthe amount ofvacationtimethat an employee may accrue orearn. Forexample, an employermay state that afteraccruing atotal offourweeks ofvacation leave, the employee will cease to earn any additional vacationtime until the employee uses some ofthe accumulated vacationtime. Thus, the employee wouldnot earnadditional vacationtime until the employee'stotal vacationtime falls belowfourweeks. Whilethe employee retains all earned vacation leave, the employerispermittedto cap, prospectively, the amount ofvacationtime or pay which itmustprovide to the employee. An acceptable variation ofanaccrual cap isthe vacationpolicy known as "use it or lose 2 it." Under this policy, employees must use all oftheir accumulated vacation time by a certain period oftime or lose all or part ofit. Some policies allow the employees to "carry over" a certain number ofhours ofvacation after the expiration ofthe designated time period. The "use it or lose it" policy effectuates a cap on accrual by limiting the total amount ofvacation time that an employee may accrue during the term oftheir employment. Under such policies, the employer must provide adequate prior notice ofthe policy to employees and must ensure that employees have areasonable opportunity to use the accumulated vacation time within the time limits established by the employer. Otherwise, a cap on accrual or a "use it or lose it" policy may result in an illegal forfeiture ofearned wages. Pro-rating Vacation Pav Employers canprotectthemselves by adopting clearandunambiguous vacation policies. Forexample, an employermayprovidethat employees beginto earn vacationtime aftera specific probationary period, suchas after sixmonths ofemployment. Anotherexample ofan unambiguous policy is onethatprovidesthat an employee earns vacationtime at arate ofone day atthe end ofeach month. However, apolicy thatprovides foremployeesto earn agivenamount ofvacation "a year," "peryear," "ontheiranniversary date," or"every six months" is not clearbecause the definitions ofthetimeperiods are imprecise and subjectto confusion concerning their start and end dates. Where an employer'spolicy is ambiguous, the actual time earned bythe employee will bepro-rated accordingtothetimeperiod inwhich the employee actually works. For example, ifan employee isto receivetwelve vacationdays "in ayear," andthe employee voluntarily orinvoluntarilyterminates his orheremploymentaftertenmonths ofemployment, 3 the employee would be entitled to ten vacation days or one day per month worked. Discharge priorto one year without pro rata payment constitutes failure to pay wages earned under Section 148. Annual Leave Some employers combine sick leave, personal leave, vacation leave, and/or othertypes of leave into one general category called "annual leave." This combined leave is also called paid time off, earned time, orpaid days off. Employers who provide annual leave instead ofvacation leave should designate the amount ofhours or days ofthe leave which are considered vacation time. Employers who have previously designated vacation time inthis manner, whether orally or in writing, shall produce proofofsuch designationto rebut a complaint ofunpaid wages pursuant toG.L.c. 149, §148. All Amendments to Vacation Policies Apply Prospectively As isthe case with any condition ofemployment affecting wages, employers may amend theterms oftheirvacation policies atany time. Any such amendment, however, must be prospective innature. We urge employersto give employees copies oftheirwrittenvacationpolicy in advance and to have each employee acknowledge in writing his orherunderstanding ofthe policy.