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Does vacation have to be paid out on termination? Michigan

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  • Does vacation have to be paid out on termination? Michigan

    I am trying to get clarification on my companies policy, but I find it a bit ambiguous. This is the exact verbage from our employee handbook.

    "To be eligible for the vacation allowance, employees must be actively at work on their anniversary date. Any unused vacation for hourly employees will be paid at the end of the year in which it was to have been taken. Salaried and Office Hourly employees will not be paid for any unused vacation time.

    (Employees who terminate their employment before their next anniversary date will be paid for any unused vacation time but will not be eligible for any of the vacation allowance associated with their next anniversary date.)"


    I am salaried and I am a bit confused by the last two lines. It seems like they are saying that I wouldn't get vacation paid if I wanted to roll it over into the next year, but would if I were to terminate.

    When they are referring to pay at the end of the year, they are clear to differentiate between hourly and salary, but they only say employees when referring to vacation pay on termination.

    Is this policy exempting them from paying out unused vacation on termination to salaried employees?

  • #2
    What I can tell you is that Michigan law does not require that unused vacation be paid out at termination unless company policy so states.

    The term "vacation allowance" is not a term with a legal definition. To answer your question, one would have to know what your company's definition is.

    Have you asked your HR for clarification?
    The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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    • #3
      Agreed. Vacation/PTO is not a federal law concept. Federal DOL is on record as saying that nothing regarding vaction/PTO is a federal concern.

      Meaning that at best vacation/PTO is a state law concept. Not as in the state must pass laws, but more like either the state does or nobody does. And as always, the states do not agree on much of anything.

      MI is not my state and I would assume that CBG is correctly citing MI rules. I can say that a lot of states (at least a third) have no rules at all on this subject and another third have "follow the company policy" as the rules. At most a third states have some sort of rules on this subject that would override a company policy and most of those states have such weak rules that your company's policy is likely just fine by them. CA (for example) would have problems with your company's policy, but you are not in CA.
      "Reality is that which, when you stop believing in it, doesn't go away".
      Philip K. **** (1928-1982)

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      • #4
        I still want to know how "vacation allowance" differs from "vacation". There seems to be something missing here. As an example of what I'm getting at, my employer offers, to employees who reach certain milestones, an additional five days over and above the regular vacation schedule. These additional days are not payable at termination and must be used within a certain time frame or they are lost. My state considers vacation to be wages (which Michigan does not), only permits use it or lose it plans under a set of very restricted rules, and earned but unused vacation must be paid out at termination by statute. (Michigan permits use it or lose it plans and only requires payout at termination if company policy says so.) But because these additional days are presented in the form of a bonus and are not "earned" as you go, they are not subject to these requirements. Neither our state AG's office, our very large and prestigious law school, the very large and prestigious law firm that advises us, or any of our labor unions has any problem with this restriction.

        So without knowing what your company's position on a "vacation allowance" has traditionally been, I am not prepared to try to translate the policy as it is presented, as anything but a guess.
        The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

        Comment


        • #5
          The only law Mi. has is that state law requires "fringe benefits" which include PTO to be paid in accordance with any written contract or policy. MCL 408.473
          Too often we underestimate the power of a touch, a smile, a kind word, a listening ear, an honest compliment, or the smallest act of caring, all of which have the potential to turn a life around. Leo Buscaglia

          Live in peace with animals. Animals bring love to our hearts and warmth to our souls.

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          • #6
            Thanks for the feedback so far. This is the excerpt about vacation allowance.

            "Vacation Allowance

            Paid vacation is provided to all full-time employees, based on length of service. The vacation allowance is renewed on the employee's anniversary date of hire each year. The vacation schedule is indicated on the insert in the back of your handbook. One day additional per year after 20 years will not exceed 25 vacation days."

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            • #7
              I am reading it that hourly employees are paid unused time at termination and salaried employees are not. They do not have to be "exempted" from paying salaried employees because they are not required to pay it in the first place.

              That is my interpretation based on the isolated paragraphs you have posted. It is possible that language you have not quoted would change that interpretation. I suggest again that you ask your HR department for clarification.

              FYI, state law on vacation falls into four groups:

              1.) Vacation must be paid out at termination regardless
              2.) Vacation must be paid out at termination only if the company policy says it will
              3.) Vacation must be paid at termination unless company policy says it won't
              4.) Vacation need not be paid out at termination

              Michigan falls into group #2
              The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

              Comment


              • #8
                Agreed. Also, the policy manual cited sounds like a "use it or lose it" policy. Which is legal in most states, including apparently MI.

                State vacation/PTO law (if any) generally looks at two points. Whether or not "use it or lose it" policies are legal (in most states they are) and whether or not vacation/PTO must be paid upon termination. Which is the point just addressed.
                "Reality is that which, when you stop believing in it, doesn't go away".
                Philip K. **** (1928-1982)

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                • #9
                  In Mi. no law prohibits "use it or lose it" policies.
                  Too often we underestimate the power of a touch, a smile, a kind word, a listening ear, an honest compliment, or the smallest act of caring, all of which have the potential to turn a life around. Leo Buscaglia

                  Live in peace with animals. Animals bring love to our hearts and warmth to our souls.

                  Comment

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