Our company policy states that two weeks vacation is given to employees when they have worked one complete year as of December 31. Therefore, on January 1, I could take two consecutive weeks of vacation time and would be paid for it.

Our company also has a policy that states any unused vacation is paid if a two weeks notice is given at seperation. Would the above scenario qualify as earned at January 1?

Or could the company legally say that since the seperation took place at mid-year, the payout should be on a pro-rata basis because it was accrued but not fullly earned?

Thanks!

Generally speaking, yes, it would be earned because you worked the required time to be entitled to it. Also, generally speaking, the time you worked from Jan. 1 through, for example, July 31, would earn you an accrual of 7/12 of your annual entitlement for 2006.

All this being said, however, Alabama law does not have any requirements about vacation plan design, nor does the law require the employer pay out any vacation balance at termination. So, this is completely up to the employer.