I am currently working in New Mexico and was reciently demoted. At the time I was told that I was being given a choice of being demoted from exempt to non-exempt with a pay cut or I could quit. Knowing that I can not survive without some income but also knowing that if I were to quit I would not be able to apply for unemployment benefits I was left with the option of demotion. I was given a paid week off to consider my options. I decided to come back to the company as I was unable to find a job and put in a request for a paid week vacation from my Paid Time that I had accumulated in 2005. I heard nothing so took my vacation to find out later that I was not paid. I read that they can designate when to use my Vacation pay, so I guess that is a moot point.
To My Question:
Should I have been give the option to be fired? Should I have been told that I had no vacation balance to take before I was given vacation with the understanding that it would be paid?
Thanks,
Clyde

They had no legal obligation to include firing as an option. If they'd wanted to fire you they could have done so.

It would have been nice of them to explain to you about the vacation balance but they did not violate any laws in failing to do so.

Some states will allow you to file for unemployment if you have suffered a significant drop in income, even if you are still employed there.
You may want to look into that.