What Happens to My Unused Vacation Time?

Employers are required to satisfy several laws regarding their employees on a variety of issues. Examples include paying fair wages, meeting safety and health codes, and providing a workplace free from discrimination. Yet, there is no federal law mandating employers provide their employees with paid vacation time or entitlement to the cash value of unused leave. This issue arises when an employee quits, is laid off, or is terminated. Lately, this issue may also arise due to the COVID-19 pandemic, when employees, through no fault of their own, were unable or not permitted to use their vacation time. 

Many employers provide their employees with paid vacation. Over 90 percent of full-time employees receive some form of paid vacation time, as well as over 35 percent of part-time workers. Whether employees are entitled to be paid for unused vacation time will depend on certain factors. Without specific legal requirements on providing paid vacation, employers will often have wide discretion on whether they provide paid vacation leave and, if so, what limits they may impose on the cash value for unused leave. 

Employers generally set up their own vacation policies; if employees have not used their accrued vacation time when they leave employment or by the end of the year, then the benefit is lost. Sometimes employers allow employees to carry over unused days into the next year but are subject to certain restrictions on how much paid vacation time an employee may accrue. 

Do States Have Laws Regarding Cash Payment for Unused Vacation Time?

States vary on how they treat unused leave. Some states consider this earned compensation and the employee is due the value of the benefit as cash wages when employment ends. New Jersey does not require employers to pay out unpaid vacation time to employees when they leave. However, it is still possible for an employer to be required to pay out the value of unused vacation time.

Courts will sometimes find that an employer has given its employee a vested ownership interest to the value of unused vacation time. This can happen when an employer and employee enter into a written employment agreement. If it expressly states the employee is entitled to the cash value of unpaid vacation leave, then the agreement can be enforced as a binding contract. Some courts may also consider a written employee handbook that discusses granting employees the value of unused vacation time as binding on the employer. These courts may find that an obligation exists on the part of the employer to pay an employee for unused vacation time. 

South Jersey Employment Lawyers at The Law Offices of Leo B. Dubler, III, LLC Help Clients with Employment-Related Concerns

If you have an employment-related concern, contact the South Jersey employment lawyers at The Law Offices of Leo B. Dubler, III, LLC. We will review your case and determine the next best steps. Call 856-235-7075 or complete our online form to schedule a free consultation. Located in Mount Laurel and Atlantic City, New Jersey, we serve clients throughout South Jersey, including Cherry Hill, Burlington County, and Camden County.