Is It Legal for an Employer to Deduct from Your Vacation Pay if You Took Unauthorized Time Off?

Understanding Vacation Pay Policies and Legal Rights

If you took unauthorized paid time off (PTO) for any reason, even accidentally or intentionally, you might be expected to pay it back. When you leave, your employer may attempt to recover this by deducting from your “cash out” vacation pay. The option to write them a check is often unfeasible, so what can you do?

How Vacation Pay Works in Practice

It's important to note that vacation time isn't mandated by state or federal law. Your employer's policies will determine how vacation time is managed. For instance, at your employment anniversary, your employer may state that you will accrue 2 weeks of vacation. However, in practice, you may accrue vacation days throughout the year. If you were to quit 6 months later, they would consider that you had "earned" 1 week of the 2 allotted, so they would not pay you for more than 5 days taken. If you had already taken 7 days, they might deduct 2 days from your final paycheck. To clarify these details, it's crucial to read your employer manual or speak with HR.

Unearned Vacation Time and What Happens When You Resign

When you leave with unused vacation time that was going to be compensated, your employer must pay you for it. The issue arises when you used unearned time. Your employer might have allowed you to use this time, thinking you would have been entitled to it soon anyway. But by leaving, you never earned it, and it must be repaid. In states like mine, and many others, banked time is now referred to as PTO (Paid Time Off). PTO is different from vacation time or sick leave. Employers do not have to pay out PTO balances at the time of separation.

Mandated Sick Leave and PTO Policies

Some states, such as mine, have legal requirements for earned sick leave time that employers must track and pay out. In such cases, employers can add these hours to the PTO ledger. There is no tracking of the actual entitlement, and they do not pay out these hours when you leave the company. If you have the choice between a vacation, sick, or personal time package and a more flexible PTO policy, it's generally better to stick with the traditional time categories. They offer clearer guidelines and are less likely to lead to disputes with your employer.

Legal Implications in Different States

The legality of deducting from vacation pay depends on your location. In some states, vacation pay is considered compensation and they have stringent laws regarding how it can be handled. In others, it is treated as an elective perk from the employer. As such, it's essential to know your rights and the policies of your employer before you resign.

Conclusion

It's crucial to be aware of the policies and legal implications regarding vacation pay before you leave a job. Understanding these policies can help you navigate the situation more smoothly and reduce the risk of financial or legal complications. Always check your employer's handbook and/or speak with HR to understand the specific rules and procedures in place at your company.