Employers Face Large Amounts of Unused Vacation Leave

One workplace phenomenon during the pandemic is that employees have been using less than normal vacation time. It’s likely the result of a number of factors such as increased demand on some workers during this time, fear of losing their job (thus, “saving” their vacation time for payout), an unwillingness to travel (and a lack of open vacation destinations) as well as the relative ease of teleworking. Whatever the reason, employers are wise to address this emerging issue well before year's end where one of two things will likely happen: employees will all clamor to take their vacation time or want a payout of this unused time because they were “unable” to use it.

If a flood of employees all request vacation time near the end of the year, employers will face operational issues and may need to deny some of those requests. In addition to facing operational issues, employers who have “use it or lose it” vacation time policies and have or will deny the use of vacation time by workers due to their work responsibilities (mostly essential workers and managers who have been needed to guide organizations through these uncharted waters), may face claims under the Wage Payment and Collection Act for lost time. 

"Use it or lose it" vacation policies are lawful as long as employees are given a reasonable opportunity to "use" their vacation. The DOL regulation on this issue states as follows:

• e) An employment contract or an employer's policy may require an employee to take their vacation by a certain date or lose the vacation, provided that the employee is given a reasonable opportunity to take the vacation. The employer must demonstrate that the employee had notice of the contract or policy provision...

• h) An employer cannot effectuate a forfeiture of earned vacation by a written employment policy or practice of the employer. (56 Ill Admin Code 300.520)

Employees who were denied use of their accrued vacation leave or were otherwise unable to use it this year might claim that losing it pursuant to policy is actually a forfeiture prohibited by law. Coupled with that is the very real issue that every employee likely needs a little time off from work to rest and refresh even if they can’t take a traditional vacation.

Employers who might face this issue should be proactive starting now by taking the following steps:

• Conduct an audit of unused vacation time for the year among all employees;
• Document which employees were denied use of vacation time to date either through the cancelation of vacations or increased workloads which resulted in the expectation that vacation time was unavailable;
• Remind employees of your vacation leave policy and encourage employees to schedule and take vacation time during the remainder of the year;
• Consider imposing vacation leave mandates (for instance, every employee with more than one year of service and has taken fewer than five days off this year must take at least five consecutive vacation days off before the end of the year);
• Consider allowing vacation carryover into 2021 on a one-time basis, especially for essential workers or those who were denied the use of vacation time to-date;
• Consider a payout or partial payout of out unused vacation time this year only.

With only five months left in the calendar year, and some employees who have or will soon reach job burnout, it is not too early to address the dual needs for employees to get away from their work (even if not physically getting away) and for employers to manage the high amount of accrued vacation time on their books.