Finance News & Insights

Can you deny departing staffers vacation payouts? Court says …

A clear vacation policy can not only save employers from answering the same questions from confused staffers over and over again, it can also save your company in court.

That’s one of the takeaways from McCaster et al. v. Darden Restaurants, Inc. et al, a recent court ruling that centered on vacation pay accrual and payouts.

Two part-time employees at separate Darden restaurants sued the chain, claiming Darden failed to pay them their accrued vacation pay when they left the restaurant.

They also tried to establish the case as a class-action lawsuit.

‘Anniversary payments’

The lawsuit essentially hinged on Darden’s vacation pay policy, which included an “anniversary payment.”

Under the arrangement, when full-time employees reached the anniversary of their hiring date, Darden paid them an anniversary payment.

That payment essentially functioned as paid vacation for the employees. So, if an employee left, Darden included accrued vacation pay (pro rata) in his or her final check.

While the vacation pay policy originally applied to all employees (full- and part-time), Darden changed its policy in 2008.

Only full-time employees

After 2008, only full-time employees were eligible for vacation pay under the policy.

One of the employees in the suit argued that denying part-time employees the equal right to vacation pay was unfair.

But the court saw it differently.

As the court put it, Darden was well-within its right to adjust its clearly defined vacation policy.

The restaurant’s policy clearly stated that it didn’t grant part-time employees vacation pay. Therefore, the workers in the lawsuit weren’t eligible for the vacation time benefit.

Case dismissed.

Review & communicate

With this case in mind, you may want to review your own company’s vacation policy and/or employee handbook to make sure it’s clear who’s eligible for paid vacation time as well as whether that time will be paid out in the event employees leave the company.

In addition, employers should go out of their way to make sure all employees are aware of any changes to the vacation policy.

Finally, check state laws, too. Employers are generally expected to follow state laws if they’re more stringent than federal regs.

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