October 24, 2006

Unused Vacation Pay Case to be Reviewed by the Minnesota Supreme Court

As you may have previously heard, on August 8, 2006, the Minnesota Court of Appeals decided a case relating to unused vacation time at an employee’s termination of employment. The court invalidated an employee handbook provision that allowed for the forfeiture of accrued but unused vacation time if an employee was terminated for misconduct. The court held that state law prohibited such a transaction and required the employer to pay the terminated employee for all unused vacation time. A previous appellate court decision seemed to make the payment of unused vacation time a matter of contract between the employee and the employer. The recent decision of the Court of Appeals alerted many companies to rethink their vacation pay policies.

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