Vacation pay is not a mandatory benefit under New York State law. However, as most employers offer vacation pay it is important to know how to ensure that your policy is properly prepared and enforced.
First and foremost employers must make sure that they have a written vacation policy that is either distributed to each employee or conspicuously posted where all employees are likely to see the notice. The written vacation policy must include an explanation of:
- How the vacation time accrues;
- When vacation time is paid to the employee;
- How vacation pay is calculated; and
- What happens to unused vacation time (for example at the end of a calendar year or upon termination/resignation).
An employer can limit how much vacation time is provided to employees or how much or little can be paid upon termination if the written policy clearly states the limitations of the policy. For example, if the policy states that employees will not be paid for accrued but unused vacation time upon termination or resignation (a "use it or lose it" policy) then no payment of accrued vacation is necessary when an employee leaves.
Many employers do pay their employees for accrued and unused vacation time and some make the payment of accrued and unused vacation time contingent upon the employee providing at least a two (2) week notice period to ensure coverage for certain positions. However, be careful not to tell employees providing notice of their intention to resign that they can leave prior to the end of their notice period. Allowing the employee to leave early will likely change the resignation to a termination and open the door for unemployment benefits.
If your written policy fails to provide how accrued and unused time is handled (or if you do not have a written vacation policy but provide vacation leave) then under New York State law the accrued and unused vacation time is presumed to be payable upon separation of employment.
It is also important to disclose how vacation pay is calculated. The policy should specify if the employee receives a flat fee, an amount calculated on prior earnings, or some other method of calculation. Whatever the process the method of calculation must be disclosed.
If you need a vacation policy or would like to have your old policy reviewed for accuracy please contact Stevan LaBonte at the LaBonte Law Group at 516-280-8580.
