Vacation Pay Policies Come Under Fire

Workers around the United States ultimately "will leave an average of three days unused — totaling more than 439 million in 2007," according to the "Vacation Deprivation" survey conducted by the online travel agent Expedia.com. In most cases this means that employees will accrue vacation time to be taken or paid at a later date.

However, how employees are compensated for accrued vacation, if they are compensated at all, varies from company to company. Some companies have policies in place that allow for unlimited vacation accrual, some have caps so that vacation time can only be accrued until employees reach a predetermined number of hours, and others have "use it or lose it" policies whereby employees forfeit vacation pay if they do not use it by a certain date. It is the latter of these vacation policies that has recently landed several employers in court battling class action lawsuits.

Although "use it or lose it" policies are typically used as a means to cut ever-soaring labor costs, many employees view this time as earned wages and are willing to go to court to prove it. On the other hand, management-side attorneys argue that the absence of federal laws mandating a set number of vacation days means that vacation compensation is left to employers' discretion, even going so far as to say that they have the right to withhold pay altogether if they so choose.

Two companies currently facing similar class actions in relation to "use it or lose it" policies are AutoNation Inc. and the staffing agency Adecco USA Inc. The former company is facing accusations in a Washington courtroom that it acted in a manner that resulted in 550 employees losing out on one year's worth of accrued vacation. Adecco is in an Illinois court facing charges that it denied employees vacation benefits.