Changing Vacation Policy after Buyout Illinois

[cthom111]

Our company is in the middle of a transition to a new owner come 1/1/15. We have our existing PTO policy that has separate vacation, sick and personal balances. Currently, we 'gift' all time up front to employees on their anniversary date to use throughout the upcoming year. We do this right from hire so EEs never accrue time throughout the year, it is just given up front.

The new company has a lump sum PTO bucket from which all time is taken, and it is based on calendar year. They are proposing that they apply a formula based on anniversary date where only a pro-rated portion of their vacation and personal balance transfers to the new company. Then everyone begins a bi-weekly accrual process starting on 1/1/15 to start building their balances back.

No one is losing their job (shockingly), all pay remains equal, and in the end most employees will benefit from having more PTO time overall, more holidays and many more perks.

There are lots of questions around employees 'forfeiting' vacation time and they feel they have earned it and should be paid out for it. I'm having a hard time finding the documentation to show this is legal in IL.

Thank in advance for any assistance!

[Raster]

Sale of stock or sale of assets ?

I don't follow the potential beef

Any employer absent a CBA has a right to,change the benefits rules in IL going forward as to vacation.

If existing employees get a pro rata transfer based on anniversary date of individual vacations etc to the new plan they have not lost a thing?

Once with the new firm they get the new firms plan going forward.

The prior vacation in in the bank for use ...

Yes I know there are other legal points..but. In an economic or fairness sense I a don't see where anyone lost anything?

[ElleMD]

Illinois law:

Vacation Leave

In Illinois, an employer is not required to provide its employees with vacation benefits, either paid or unpaid. An employer is required to pay these benefits only if it has established a policy, promised, or contracted to provide them. See 820 ILCS 115/2.

An employer must pay an employee for all accrued or earned vacation upon separation from employment. An employer cannot maintain a policy or employment contract requiring the forfeiture by an employee of accrued vacation upon separation from employment for any reason. 820 ILCS 115/5; 56 Ill. Adm. Code 300.520. The only exception to this rule is if the employer is party to a collective bargaining agreement with a union that provides otherwise. 820 ILCS 115/5.


An employer can implement a vacation policy where employees must use vacation time by a certain date or lose it (a “use-it-or-lose-it” policy), but must permit employees a reasonable opportunity to use the leave. 56 Ill. Adm. Code 300.520(e).


If I understand correctly, Jane was hired in June and gets 12 vacations days a year. Every June, she gets 12 days, no qualifiers. New owner comes in and decides that since Jane's anniversary is half way into a year, she may only carry over 6 days. Starting in January, she will start earning some amount of time each pay period or month. More likely than not legal as use it or lose it policies are permitted so Jane is limited in carry over based on service time. You can run it by the DOL, but as long as it is handled as described, it is likely legal.

[Raster]

Ouch..the math light just went on.....

OP...in The prior 12 days vacation example if employee A was hired in Jan and has 12 days left and employee B was hired in Oct and has 12 days left, how may days does each carry into new,situation per the pro rata situation your describe?

Does this de facto create a use it or lose it new rule and how does that fit 300.520(e) ?

Might it be cleaner to just pay out unused vacation effective 1/1/15'?

[cthom111]

Thanks for the replies...let me give some examples. Jane has her anniversary in January and received 10 vacation days up front to use from Jan 14 to Jan 15. She will carry over 12/12 of whatever her balance is on 12/31/14.

John has his anniversary in May and received 10 days to use from May 14 to May 15. He will carry over 8/12 of whatever his balance is on 12/31/14.

Dave's anniversary in Dec and he carries over 1/12 of his current balance since he just received his yearly allotment that month.

Everyone starts accruing on the new plan on 1/1/15 and there is no payout. Payout would have been easier but we are moving to new company's plan so we had no input.

In the end, most people will lose some vacation time depending on their balances... but they will begin to accrue right away and have at least as much vacation time to use over the course of the next year. There is a perceived loss because we are taking vacation out of their balance but they will quickly accrue that time back and have more time to use in 2015 than they had on the current plan.

[Raster]

I've been out of HR a long time ....and may be rusty . Or even wrong ..so add a big dose of salt

Some thoughts:

LThe view that one catches up later and or is better later is not the final word as to the actual transition or the " rules."
2. Defacto you have created a use it or lose it change ...see quote provided by ElleMD re 300.520(e) and if (e) holds you need to provide some window to use it up?
3. Earlier I asked if this was an stock purchase or asset purchase ..at least the older view was that an asset sale triggered a constructive termination of employment under the original employer and a new employment under the new employer ....that may trigger a separation of employment situation as defined by 300.520 in general..and thus a payout trigger.
4. More liberal options to use it all or pay it all may not be perfect or make everyone happy but they may be more value effective than a team of lawyers at $400/ hr each to sort it out and a big handful of disgruntled employees
5. The front end award of vacation days may not be everyone's idea as wise ..but it is not a "gift" and I think that word does not help you resolve this issue of what looks to others as a form of vested benefits.

[ElleMD]

As use it or lose it is legal, this should be permitted. You can always run it by the DOL, but if you are continuing to be employed and your balances will transfer, leave need not be paid out.

[Raster]

Perhaps I misread OP...but if the employee is not permitted to use it up and the full balance does not transfer therein may lie a rough edge?

But if one can use it up and or transfer the balance ....that to me is one clean answer....

[Marketeer]

The OP is asking for documentation the acquiring company's proposal is legal in Illinois. This may be a case where no law specifically addresses whether it's legal or not. In the absence of a law prohibiting it, then it's presumed to be legal.

It would seem to me, however, that the policy as stated is backwards on how much to carry over based on anniversary dates. The person whose anniversary date is in January will have had all year to use up the allotted time given in January 2014 -- why should they be allowed to carry over 12/12 (100%) of the unused balance when the person who's anniversary is in December is only allowed to carry over 1/12 of the unused balance (and has mere weeks to use their time). Unless there's something I'm missing....

[cthom111]

The thought with the ratios is that someone who had an anniversary in March 14, for example, received their yearly allotment and has in theory probably used more time than someone who has an anniversary in December. So those who have had more time since their last anniversary can carry over a higher percentage of a potentially lower balance. Update we just received - everyone carries over 3 full days automatically to the new plan.

If they all received 25 days vacation on their anniversary dates, the March anniversary might carry over 10/12 of a 4 day balance (~3.33 days + 3 days automatic) since they have burned through more vacation in the past 9 months....and a December anniversary carries over 1/12 of 25 days since they just received their full year allotment (~2.08 days + 3 days automatic).

It's definitely not perfect but seemed to be the only logical way in the new company's eyes to make this equitable across the board. But those who have balance left have the next 1.5 months to use any remaining balance before the transition...but if an anniversary falls on 12/29, they get 25 days dumped into their account and then it gets taken away 3 days later and only 5.08 days get transferred to their new balance. They have no chance to use up their time. These are the situations that scare me (legally speaking).

[Raster]

At least 5 years ago cbg commented on some problems of front end loaded benefits that vest in some states such as MA and Il ...this may be yet an example ..

My most recent employer ( Not in Il ! ) also front ended vacation and sick leave ...with some convoluted outcomes as the end as to use it or lose it or pay it out .....so in a way I' m sensitive to the math ...

My read is in two parts.

1 The employer is free to adopt a use it or lose it rule ..but under 300.520(e) must give employees a reasonable opportunity to use up prior credited leave. I read OPs post in context that the transfer rule becomes a form of use it up by 1/1/15 or lose " some " of it on a case by case basis. Whether that is correct or is a reasonable time .......

2. If this is an old fashioned purchase of assets then it might be viewed as a termination of employment under the original employer ..and that seems to trigger a payout at least to me. The issues of a successor employer being in shoes of original one seem to vary on a state by state basis ..and even what may seem true for UC math may not be true for wage purposes. ( In my earlier roles we had whole teams of lawyers to sort out some of the interstate merger and acquisition details ....no , I never recall this wrinkle due to,a front end loaded plan ...but that doesn't mean it doesn't exist .

My wild guess is that an IL court would be prone to give IL employees the full protection of whatever IL law provides....

To me the problem is a bit of the reverse in Il ....once a benefit has been granted ..by what IL law can it be taken away?

[Raster]

Equity is in the eye of the beholder ... ( My eyes don't count either )

and if one of your employees has or gets 25 days per the written plan just before the transition, he or she is entitled to whatever Il says is the answer ..

At least as I understand it, your firm is free to change or eliminate future vacation grants...And you might consider same ..knowing there is a sure and certain transition ..makes no sense you grant new blocks of vacation between now and 1/1/15 ...it might make sense to grant new amounts consistent with the new employers way...so you don't have new windfall situations to address?