Class Action…Fired Employees Entitled to Vacation Pay?

In June, over 467,000 jobs were cut by employers, driving the unemployment rate up to a 26-year high of 9.5 percent. From General Motors to Microsoft to General Electric, most if not all business sectors are struggling to handle the lingering economic downturn. But along with the terminations come questions related to earned income, specifically issues of accrued vacation time. Courts throughout the country are examining corporate policies and contracts to determine whether fired employees are receiving all of the compensation they deserve.

The Supreme Judicial Court of the Commonwealth of Massachusetts ruled earlier this month that fired workers are entitled, under state wage law, to compensation for unused vacation time. The decision comes after Attorney General Martha Coakley challenged the decision of Electronic Data Systems (“EDS”) to deny a terminated employee owed vacation time.

According to the Massachusetts wage law, “wages shall include any holiday or vacation payments due an employee under an oral or written agreement.” The court determined that since the terms of the company’s employment contract stated that employees were eligible for vacation pay based on weekly hours worked and years of service with the company, then the employer must pay the value of the earned vacation when it has prevented the employee from exercising her right to take the paid vacation.

While every state has wage laws that allow for terminated employees to collect past wages that were earned, some states like California and Illinois have statutes that state that where an employer provides for paid vacation, it must compensate the employee for earned but unused vacation when the employee is discharged. These state statutes also prohibit employment contracts which provide for a forfeiture of earned or vested vacation pay upon termination of employment.

Most other states, however, rely on the terms of the company’s employment policies. Therefore, courts will only permit recovery of vacation pay after determining that the provisions of the employment contract allow for such recovery. While the terms of some contracts may prove that an employee is not entitled to accrued and unused vacation pay, other employment contracts require interpretation. For instance, an Ohio court determined that a fired employee’s actions did not qualify as “gross misconduct” as stated, but not defined, in the employment contract, and therefore the employee was entitled to his vacation pay after being terminated.

Therefore, if you have been recently fired from your job and did not receive compensation for your earned vacation time, then you should contact an attorney to make sure that your rights are protected and that you get the compensation that you deserve. Contact Pogust Braslow and Millrood, LLC for a free consultation.