Summary

While paid vacation time is not a required benefit under Illinois labor law, policies, oral promises, handbooks, memoranda, and uniform patterns of practice may create an obligation on the part of the employer to pay the monetary equivalent of “earned vacation” whenever an employee is terminated – either voluntarily (quits or resigns) or involuntarily (fired).

Employees may be required to take vacation by a certain date or lose the vacation, provided that they are given a reasonable opportunity to take the vacation.  The burden is on the employer to demonstrate that the employee had notice of the contract or policy provision.

Recently (10/2009), a U.S. Federal Judge in Illinois approved a settlement in which Kelly Services agreed to pay $11 million to settle a class-action vacation pay lawsuit that claimed Kelly shorted employees on their vacation pay. The class includes 96,000 of Kelly’s temporary workers that worked for its Illinois clients between 2002 and 2008.

Overview of State Law:

Illinois state law provides that

“Every employer shall pay the final compensation of separated employees in full, at the time of separation, if possible, but in no case later than the next regularly scheduled payday for such employee. Where such employee requests in writing that his final compensation be paid by check and mailed to him, the employer shall comply with this request.”

“Unless otherwise provided in a collective bargaining agreement, whenever a contract of employment or employment policy provides for paid vacations, and an employee resigns or is terminated without having taken all vacation time earned in accordance with such contract of employment or employment policy, the monetary equivalent of all earned vacation shall be paid to him or her as part of his or her final compensation at his or her final rate of pay and no employment contract or employment policy shall provide for forfeiture of earned vacation time upon separation.”

With respect to the payment of wages or final compensation, the Illinois Department of Labor provides the following guidance and directives:

a)         Whenever an employment contract or an employment policy provides for paid vacation earned by length of service, vacation time is earned pro rata as the employee renders service to the employer.

b)         Oral promises, handbooks, memoranda, and uniform patterns of practice may create a duty to pay the monetary equivalent of earned vacation.

c)         Claims for vacation pay must be brought to the Department within three years from the date the vacation is earned.

d)         Nothing in this provision shall be construed to reduce or impair the right of the claimant to maintain a civil action to recover additional vacation pay found due by such courts.

e)         An employment contract or an employer’s policy may require an employee to take 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.

f)          The Department recognizes provisions whereby:

1)         no vacation is earned during a limited period at the commencement of employment.  The employer must demonstrate that the provision is not a subterfuge to avoid payment of vacation actually earned by length of service and, in fact, no vacation is implicitly earned or accrued during that period.

2)         vacation is earned and accrues at an accelerating rate during the year. The provision is acceptable when the acceleration period and the changes in accrual rates are reasonable, and the policy is uniformly applied.

3)         the employer does not have separate arrangements for vacation and sick leave.  Under the provision, employees earn a certain number of “paid days off” which they can use for any purpose, including vacation and sick leave.  Because employees have an absolute right to take these days off (unlike traditional sick leave where using such sick leave is contingent upon illness), the Department shall treat “paid days off” as earned vacation days.

g)         Any employer that provides paid vacation to its employees must maintain true and accurate records of the number of vacation days earned for each year and the dates on which such vacation days were taken and paid.

As there are important time limits that apply to any potential claim you may have, you should act promptly to insure that your rights are protected. Call us at 713-782-LAW1 (5291) or toll free at 1-866-559-0400 or submit your information using our convenient online intake form.