Vacation pay out upon termination

(This is an Anonymous post from an HR practitioner - Steve)

We are in the state of Ohio and I know over the years I have always had the understanding that any accrued vacation must be paid out upon termination. 

However, I have read several recent court cases that have said the courts go with whatever is written in your handbook.  Therefore, I was wondering how others handle this.

For example, can our handbook say that in order to be paid out for accrued vacation you must give at least two (2) weeks notice?  And, if an employee is terminated for cause, we will not pay accrued vacation etc.?  Or do we have to pay no matter what? 

The issue we are having is it has been a complete nightmare from a payroll side to track accrued vacation and so we are tossing around the idea of just giving new hires a week or vacation after their year anniversary.  Therefore, without these parameters, our fear is if a person reaches their one year and quits the next day we will have to pay them 5 days regardless.

Any insight to how you guys have handled this would be helpful.  Thank you for your help!

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  • We are in Georgia (accounting firm)  and we accrue and track PTO in our practice management software and it is really easy.  

    As far as paying out time at termination - we pay, even if the person is being terminated for cause.  The thought is that it is a benefit that they earned, so we should let them have it.  We also let people go up to one week "in the hole" on PTO as long as they have time to accrued it back by the end of our fiscal year. If they are negative at termination, we adjust their final check accordingly.

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  • You are correct that Ohio law does not mandate vacation payout and courts generally enforce the written policy/ handbook of the employer.

    So if your organization does not want pay out vacation upon termination, you could write that into your policy. An unintended consequence of doing this could be those employees planning on quitting simply using all of their vacation time prior to submitting their resignation.

    The following cases were taken from the myemploymentlaweryer.com website:

    • Ammons v. Akromold, Inc. (May 20, 1998), Summit App. No. 18641, 1998 Ohio App. LEXIS 2202; Winters-Jones v. Fifth Third Bank (May 27, 1999), Cuyahoga App. No. 75582, 1999 Ohio App. LEXIS 2410 (holding that former employee was not entitled to payment for vacation time accrued but not used at the time she left her employment where the company's policy manual clearly stated that vacation time must be used during the employee's employment or is lost);
    • Bologa v. I.H.S., Inc. (Mar. 17, 1999), Summit App. No. 19218, 1999 Ohio App. LEXIS 1107 (determining employee was not entitled to unused vacation pay at termination where employer's vacation policy stated that no paid time off would be paid out at termination).
    • Van Barg v. Dixon Ticonderoga Co., 152 Ohio App.3d 668, 2003 Ohio 2531, 789 N.E.2d 727 (holding employer was entitled to implement "use it or lose it" vacation policy prospectively, but could not apply the policy retroactively to divest terminated employee's vacation time accrued before the policy went into effect);
    • Spry v. Mullinax Ford (Nov. 13, 2000), Stark App. No. 2000CA00118, 2000 Ohio App. LEXIS 5265 (enforcing written company policy requiring employee's continued employment on anniversary date to be entitled to payment for accrued vacation time). Compare,
    • Braucher v. Allied Truck Parts Co., Stark App. No. 2002CA00278, 2003 Ohio 1698 (holding employee was entitled to accrued vacation pay upon termination where employee handbook expressly provided that "Eligible employees will be paid for earned but unused vacation upon termination".
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  • Here is some language we've used for Ohio clients:

    If leaving the company, vacation time cannot be used during or to extend your notice period. Unused vacation will not be paid out upon voluntary or involuntary termination.

    Plus, check your payroll system. We use Paycor and I track our accrual and use of PTO through it. Feel free to contact me (Robin@strategicHRinc.com) with any questions.

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