By now, most employers have at least heard that California prohibits “use it or lose it” vacation policies—meaning that once an employee earns vacation time, that time can’t be forfeited for any reason. But can an employer decide not to award vacation time right away to new employees?
The answer is yes—according to a recent decision of a California appeals court.
Lisa Owen was a long-time employee of the Robinsons-May department store in Arcadia. In January 2006, Macy’s, Inc. acquired Robinsons-May and notified Owen and her coworkers that the Arcadia branch was being permanently closed. Owen was paid a generous severance package based on years of service. Her last day of employment was April 14, 2006.
Our HR Management & Compliance Report: How To Comply with California and Federal Leave Laws,
covers everything you need to know to stay in compliance with both
state and federal law in one of the trickiest areas of compliance for
even the most experienced HR professional. Learn the rules for
pregnancy and parental leaves, medical exams and certifications,
intermittent leaves, required notices, and more.
Despite the severance pay, Owen sued Macy’s as the successor of Robinsons-May, claiming that the company’s policy of not allowing employees to earn vacation benefits until after an initial six months of continuous employment violated California law.
According to the policies stated in the Robinsons-May employee handbook, after the first six months of employment, employees earned vacation benefits that vested on May 1 and August 1 of each year. Owen argued that because she should have begun earning vacation benefits as of the first day of employment sixteen years earlier, she was legally entitled to her vacation pay for the 2006-2007 year, even though her employment ended in mid-April.
In upholding the lower court’s dismissal of Owen’s claim, the appeals court described in detail the authority that California law leaves to employers regarding the terms of vacation benefit plans. We’ll have more on this case, and what guidance it provides to employers, in an upcoming issue of California Employer Advisor.