Exempt employee vacation and comp time

I've read that vacation time is considered earned wages and should be paid to the employee when they leave but I've also heard that this is true in only some states. Does it apply in GA which is a right to work state and does it apply to exempt employees?

Also, my company has a comp time policy for exempt employees which was started with the intent that it would be positive but now I'm wondering if it's more trouble than it's worth. I have an exempt employee who is leaving...do we need to pay him the comp time he has banked?

Our employee manual states that we won't pay either one when the employee leaves...wondering if that's okay.

Comments

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  • Hi, there. I am in TN and not familiar about state law in GA. However, our policy manual states that a full-time employee giving notice of termination is entitled to the full amount of unused vacation pay for the current anniversary year and for any unused vacation for which the vacation carry-over benefit was granted. Our comp time benefit is to encourage periods of rest and relaxation and cannot be exchanged for pay. Our company has never had a situation arise (yet) of employees not using comp time and then leaving. I would presume the exception would be if someone had just come back from a meeting (earning comp time) and then offered the "dream job". Good luck!
  • Also, we had the luxury of an attorney reviewing our policy manual. I would recommend you do that as well, as the attorney would know of GA laws.
  • You may want to check the Department of Labor's website [url]http://www.dol.gov[/url]. I believe that FLSA restricts comp time to the public sector only and that It is not allowed in the private sector. It is my understanding that exempt employees are salaried and the amount of hours they work a week in most situations does not impact their pay and that it is important that we don't treat exempt employees as non-exempt.
  • I think the comp time that is only allowed in the public sector applies to non-exempt employees only. You may give non-exempt employees comp time in lieu of overtime so long as it's awarded at 1.5 times the amount of hours worked past 40. You cannot do this in the private sector.

    You can allow exempt employees to earn comp time based on whatever scheme you devise. It's a hassle and I don't recommend it (See previous postings), but you can do so without losing the exemption.

    You must pay any employee for any accrued, but unused vacation time upon termination, no matter in what state you are located. This is based on a Supreme Court case. Hope that helps. Call me if you have questions.

    Margaret Morford
    theHRedge
    615-371-8200
    [email]mmorford@mleesmith.com[/email]
    [url]http://www.thehredge.net[/url]
  • Margaret: Could you give me the name of that Supreme Court case concerning paying for accrued vacation benefits? My understanding is that this was based purely on state law. If this is the case, then we have a lot of folks out there who are not in compliance.


  • I am curious too. Does this just apply when you have a bona fide "vacation" plan? Since we changed our policy to PTO (not vacation or sick time) we were advised that this is NOT considered wage equivalents and that we do NOT have to pay accrued time out upon termination.
  • we pay acrued vacation if the individual gives 2 weeks notice. Is this a problem? Employees are told this upfront and I thought I had read in another forum here that was ok?!
  • Rockie,

    The decision is at least 20 years old and deals with "accrued" vacation only. I cannot find a site for it, but did some quick research about the issue since that decision came out. Some state courts have allowed employers to spell out very clearly in their handbooks/policy manual how this accrued time can be forfeited upon termination or in a "use it or lose it" policy. It's all over the board state by state. I cannot find where any of these policies have been tested before the US Supreme Court. Courts are very funny about forfeiting earned compensation and you usually end up with a wage and hour audit when someone complains. Several employers have lost these types of forfeiture cases simply because the courts determined that the employee was not adequately notified of the policy. Please have your policy checked by an attorney that specializes in employment law, not just a generalist.

    Margaret Morford
    theHRedge
    615-371-8200
    [email]mmorford@mleesmith.com[/email]
    [url]http://www.thehredge.net[/url]
  • Margaret,

    We are a multi-state employer and it has been our experience that in most cases, the courts will defer to what the employer has communicated to the employee via a written handbook, policies & procedures, and meetings. The question that has to be answered in this situation is what is the Georgia definition of "Wages". If they include accrued vacation as part of the definiton of wages, then it will be an uphill battle to try and get the accrued (but unused) vacation legally deducted from their final pay. It can be done, but it may not be worth the effort.

    One other thing, the case below was in the Georgia Employment Law briefs section of HRHero. I thought that you might be interested in it. It appears to support the argument that accrued but unused vacation is considered wages in Georgia.





    Former Executive Wins $446,000 in Wrongful Termination Suit. In an unreported case tried in Cobb County State Court, John Hildebrand, Jr., the former president and chief executive officer of Magnus Software Corp., sued Magnus, claiming he did not receive severance or accrued vacation pay upon termination. According to Hildebrand, Magnus had agreed to pay him $200,000 in severance pay if he were involuntarily terminated. When Hildebrand ceased work at Magnus in September 1991, Magnus refused to give him any severance pay or accrued vacation pay. Hildebrand then sued Magnus for age discrimination and to recover the severance and accrued vacation pay. Magnus defended the lawsuit arguing it had never made a final agreement with Hildebrand on the severance package and that Hildebrand had actually resigned and was not entitled to vacation pay. The jury awarded Hildebrand over $446,000, including the $200,000 in severance pay, vacation pay, prejudgment interest, $62,000 in punitive damages for the conversion of his vacation pay, back pay for age discrimination, and attorney's fees.

    Hildebrand v. Magnus Software Corp., No. 91-A-9925-2. Source: Fulton County Daily Report.


  • The most recent federal court decision I've seen regarding this specifically ALLOWS companies to avoid paying accrued-yet-unused vacation at termination as long as the company has a well-written and well-communicated policy. Did I miss a more recent decision, MM?
  • There seems to be several different opinions on this subject. Can we resolve which is the correct information, at least for those states in question?
  • I feel it is two-fold. First, each company should have an attorney to help them with their own state rules & regs. Secondly have a policy manual that an an attorney agrees that is legally sound.
  • I don't know about Georgia, but here in N. Carolina we pay employees for unused vacation days. We don't pay for unused sick days or straight comp time. We do pay for premium (time-and-a-half) comp time.
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