Are Employers Required to Pay Vacation Time When You Lose Your Job?

If you find yourself suddenly unemployed or sick as a result of the coronavirus pandemic, will your employer pay you for vacation time?

Under the Fair Labor Standards Act, an employer does not have to offer paid vacation time to its employees. However, if you get paid vacation as a condition of employment, state law dictates how it is to be paid to you upon termination or during a layoff. A state can require that an employee pay out the available time, or abide by a company policy. If the state leaves the vacation payout decision up to company policy, you must follow the policy.

In March 2019, Michigan instituted the Paid Medical Leave Act, which required employers in Michigan to provide paid sick leave. The act applies to employers with 50 or more employees. Eligible employees have the opportunity to accrue paid medical leave up to 40 hours per benefit year. There are several exemptions under the act, for example: individuals under 18 years of age, employees who work less than 25 hours per week on average, and most overtime exempt employees.

Most employers grant you full vacation benefits at the start of each year. Others have an earned accrual method that gives you days off at a rate of so much per month as you work for them. The law provides for accrual of one hour of paid time off for every 35 hours of actual work. If your policy meets or exceeds the law’s accrual criteria, you are all set. Michigan’s law requires a carryover of unused benefits of up to 40 hours if the employer is on a pro rata accrual method. However, if your paid time benefit provides for a full grant of benefits at the start of each year, carryover is NOT required.

Many employers covered by the Family Medical Leave Act (FMLA) have coordinated FMLA with other paid time off benefits so that those policies’ paid benefits are exhausted during FMLA leave. That means if you take FMLA time you may also have to first exhaust your paid vacation time.

So, if you lose your job it’s important to ask: Do you get paid vacation? If so, is it given to you upfront or accrued? How much vacation time have you earned? How much have you taken so far? Then do the math.

Some helpful resources:

  • If you’re an employer, review this PDF to see how the law applies to your company.
  • If you’re an employee, visit Michigan.gov for FAQs about what you can expect for vacation time pay.
  • If you have been let go as a direct result of COVID-19, review these FAQs from the Michigan Chamber of Commerce, as the law has recently changed.

The employment lawyers at Grewal Law PLLC have extensive experience fighting for your rights as an employee. These are unprecedented times. Both employers and employees are struggling. If you have an employment-related legal issue we can advise you and help you to protect your rights.

Need to speak with an attorney? Contact our employment law team at (888) 211-5798 today.

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