Mass. Gen. Laws c. 149, §148 provides that a discharged employee must be paid “in full” his or her wages on the date of discharge. That section also provides that the term “wages” includes “any holiday or vacation payments due an employee under an oral or written agreement.” Thus an employer must pay for accrued vacation time on the date of discharge, along with all other wages earned to that date.  So, if you do not have a clear policy as to how vacation accrues, how much vacation pay do you give an employee on that date? What if you have no defined policy—you merely tell the employee he or she has, say, two weeks vacation?

In the event of no defined policy (which is usually the result of an oversight), I have always counseled the practice of giving the entire year’s vacation time (less any time taken) pay on discharge.   A client of mine wanted a detailed memo about discharge policy and, while researching the subject, I came across the following advisory.   The Massachusetts Attorney General’s Advisory 99/1 Vacation Policies states:

             “Employers can protect themselves by adopting clear and unambiguous vacation                    policies . . .A policy that provides for employees to earn a given amount of vacation “a year, “ “per year” . . . is not clear. Where an employer’s policy is ambiguous, the actual time earned by the employee will be pro-rated according to the time period . . . in which the employee actually works. For example, if an employee is to receive twelve vacation days “in a year,” and the employee voluntarily or involuntarily terminates his or her employment after ten months, the employee would be entitled to ten vacation days or one day per month worked. Discharge prior to one year without pro rata payment constitutes failure to pay wages earned under Section 148.” (emphasis mine)

            Does the above mean that vacation pay may be apportioned if no policy is stated? One employment lawyer with whom I spoke and a person at the Attorney General’s office suggested that the pro ration in the AG’s Vacation Policy above only applied if the employer’s policy was ambiguous.   There is a difference between an ambiguous policy and no stated policy. The thinking was that “no accrual policy” was not ambiguous—it was clear; the entire vacation time accrues at the beginning of the year.

If you want to pro rate vacation pay on discharge, make your vacation policy known (post it or include it in a manual or in a hiring letter) and clear.

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