Must an Employer Pay a Departing Employee for Unused Vacation Time?

09/10/2013 // Dallas, Texas, United States // Attorney Keith Clouse // Keith Clouse // (press release)

Question: I own a mid-size business. An employee recently resigned and said he expected to be paid for his unused vacation time. Is the company obligated to pay him?

Answer: Probably not. No Texas or federal law requires an employer to pay a departing employee for accrued but unused vacation leave. Therefore, each Texas employer has the discretion to choose how to handle the situation. Most employers do so by drafting policies that indicate how vacation leave will be treated when an employee separates. Check your company’s policy. If it indicates such leave will be forfeited when an employee separates, your company has no obligation to pay the employee for that leave.

If your company has no policy, you could consider developing a simple one, such as “Accrued but unused vacation leave is forfeited when an employee separates from employment.” Some employers opt to pay for accrued but unused vacation time in certain situations. For example, an employer may wish to compensate employees who are laid off, employees who resign with at least two weeks’ written notice, employees who retire, or employees who have been with the company for more than ten years.

To learn more about an employer’s obligations to a departing employee, contact an employment lawyer in your area. This article is presented by the employment law attorneys at Clouse Dunn LLP. For inquiries, send an email to [email protected] or call (214) 239-2705.

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