Want to withhold payment for unused vacation upon termination? Make sure you can.

Lew Clark
May 16, 2006 — 2,055 views  
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Many states have either statutes or court decisions which treat unused vacation as a deferred, earned benefit or as wages which have to be treated the same as the employee’s base wages or salary upon termination. That means that, even if the employer wants to, it may not be able to withhold payment for unused vacation from the departing employee’s final paycheck. Some states have statutes that provide that the employer may withhold payment for unused vacation from the final paycheck if the employer and the employee have an agreement to that effect. Other states have statutes or court decisions that provide that an employment policy or handbook provision can enable an employer to withhold payment for unused vacation. Some states’ laws are completely silent on the issue. Some states’ laws prohibit withholding the payment under any circumstances. Employers need to be sure they know the laws in each of the states in which they have employees. They also should not assume that a handbook provision, a longstanding practice or even a written agreement with the employee will be effective everywhere to enable the employer to withhold payment for unused vacation.

Lew Clark

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Lewis Clark concentrates his practice on counseling and advocacy for both private and public sector employers in all types of labor and employment matters and is an experienced mediator of employment and other civil litigation matters.