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The appellate court reversed summary judgment in favor of the employer, finding that the question of whether the employer's particular sabbatical program granted a legitimate sabbatical (which does not have to be paid out upon termination), or was a subterfuge for additional vacation time, could not be answered based upon the facts before it. In reaching its decision, the court set out a four-part test for determining whether paid time off qualifies as a sabbatical and, by extension, when paid time off must be treated as vacation.

The factors of this new test are: (1) frequency of the leave; (2) length of the leave; (3) whether the leave must be in addition to regular vacation; and (4) whether the leave must be for the purpose of enhancing the employee's value as an employee upon his or her return to work.

Applying the four factors to the case before it, the appellate court found there was conflicting evidence regarding the employer's purpose in establishing the sabbatical program, and remanded the case for trial on that issue.

To learn more about the decision and its implications for employers, please continue reading Littler's ASAP, California Appellate Court Answers the Question "What Is Vacation?", by Margaret Gillespie.

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A vacation or sick leave buy-back program typically affords an employee the opportunity to cash-out his or her unused vacation or sick leave benefits. Such programs incentivize employees to work rather than take unnecessary vacation or sick leave (in order to retain the pay benefits). Employers also utilize these programs to save on the cost of overtime and per-diem workers. In Chavez, the City’s employees were subject to such a vacation and sick leave buy-back program. However, when the City would determine its employees’ overtime rate by calculating the employees’ regular rate to include “straight time” and add-on payments, it did not include vacation or sick leave buy-backs.

In its analysis, the Tenth Circuit first noted that pay for vacation and sick leave actually taken is not part of the FLSA’s regular rate calculation. Regarding the issue that arises when an employee works instead of taking his of her vacation or sick leave day, the court agreed with the Department of Labor’s position on the matter – vacation buy-back is not part of the regular rate, but sick leave buy-back is. According to the Department, vacation leave pay should not be included in the regular rate because it is not compensation for actual work, whereas sick leave pay should be included in the regular rate because it is analogous to an attendance bonus.

There is somewhat of a circuit split as to whether sick leave buy-backs should be included in the regular rate. For instance, the Sixth Circuit has held that sick leave buy-backs should not be included because “awards for nonuse of sick leave are similar to payments made when no work is performed due to illness...” Featsent v. City of Youngstown, 70 F.3d 900, 905 (6th Cir. 1995). Thus, Chavez represents the Tenth Circuit’s split from the Sixth Circuit, and joining with the Eighth Circuit and Department of Labor, in holding that sick leave buy-backs should indeed be included in an employer’s calculation of the FLSA regular rate.

This entry was written by Milton Castro.

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Under the new rules, employers must pay terminated employees commissions or bonuses already earned, based on routine or practice or special agreement. An employee earns a commission or bonus when the employee has met all required conditions set forth in an agreement. The regulations state, however, that if an employer wishes to change the terms of such an agreement, it must do so in writing and with notice to the affected employee. In addition, the regulations provide that draws against commissions or bonuses may be recovered from an employee’s pay.

The regulations also provide guidance regarding loans to employees. For example, employers may only recoup employee loans using the written authorization described in Texas Labor Code §61.018 (pdf), unless it is a “wage advance.” Under the regulations, a wage advance is an advance that is recovered from the next regularly scheduled paycheck. Such an advance is not considered a deduction or withholdings under Texas Labor Code §61.018. The regulations further provide that, in recouping a loan, employers may count the loan repayment toward any minimum or overtime wages due.

The regulations also state that expense reimbursements paid to employees are not wages for purposes of the Texas Labor Code.

This entry was written by Harry Jones.

The Massachusetts Attorney General argued that the unused vacation pay became “due” as soon as it accrued and, therefore, constituted earned wages that must be paid upon termination. In its opinion, the court emphasized that the vacation pay at issue was “earned” because it accrued according to days and years worked. The court also afforded “substantial deference” to an advisory issued in 1999 by the Massachusetts Attorney General’s Office stating that “[e]mployees who have performed work and leave or are fired, whether for cause or not, are entitled to pay for all the time worked up to the termination of their employment, including any earned, unused vacation time payments.”

It remains an open question whether the court’s reasoning applies to payments for vacation time accrued by employees who voluntarily leave their jobs. Because the employee at issue in the case was involuntarily discharged, the court declined to address the question of voluntary departures. However, the Attorney General’s Advisory and statutory text upon which the court relied do not appear to draw a distinction between vacation pay due upon involuntary termination and that due upon voluntary termination.

This blog entry was authored by Amy Mendenhall.