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Let's assume an employer has a use-it-or-lose-it vacation policy that allows employees to carry over 40 hours of vacation time from one year to the next. An employee ends the year with 60 hours of accrued vacation, and thus loses 20 of those hours. Given that Massachusetts law considers vacation time wages, and other circumstances require paying out those hours as if they were time worked (for example, on termination of employment), is the company obligated to pay out the hours lost to the use-it-or-lose-it policy?

Assume the employee in question was not prevented from taking vacation; they could have, but chose not to.

(reposted here as requested from workplace.stackexchange)

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  • I believe Section 111 is for civil servants employed by a town or city. Does that apply to you? And in 148, the mention of vacation may apply to vacation taken during the pay period in question--then it's treated as wages.
    – mkennedy
    Feb 1, 2023 at 23:57
  • @mkennedy those aren't the only mentions of it in law, just examples. AFAIK, it is generally true in MA that unused vacation time must be paid out as wages on termination of employment. Whether the sections I pointed out are relevant or not, the question still remains as to whether an obligation exists or not.
    – asgallant
    Feb 2, 2023 at 6:10
  • I think you should also ask: Is the company obliged to give you paid time off if you would otherwise lose your holidays? If not but they really want you to work what kind of agreement should be put in place?
    – gnasher729
    Feb 4, 2023 at 6:55
  • @gnasher729 MA law is clear that if you lose vacation time because the company refused to let you take it, they would be required to pay it out in cash. In this case, the employee misunderstood the vacation carryover policy and lost time because of the misunderstanding.
    – asgallant
    Feb 5, 2023 at 17:05
  • @asgallant I worked for one company with the policy "5 days taken within the first three months, plus any holiday that starts in the previous year and extends into the next year". So you could take of Dec 31st to Jan 30th in an extreme case.
    – gnasher729
    Mar 5, 2023 at 0:46

1 Answer 1

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Here is an extract about "use-it-or-lose-it" vacation policies from the Massachusetts Attorney General's Fair Labor division (Link goes to a Word document):

An acceptable variation of an accrual cap is the vacation policy known as “use it or lose it.” Under this policy, employees must use all of their accumulated vacation time by a certain period of time or lose all or part of it. Some policies allow the employees to “carry over” a certain number of hours of vacation after the expiration of the designated time period. The “use it or lose it” policy effectuates a cap on accrual by limiting the total amount of vacation time that an employee may accrue during the term of their employment. Under such policies, the employer must provide adequate prior notice of the policy to employees and must ensure that employees have a reasonable opportunity to use the accumulated vacation time within the time limits established by the employer. Otherwise, a cap on accrual or a “use it or lose it” policy may result in an illegal forfeiture of earned wages.

Accrual cap is explained earlier in the document. To paraphrase, a company could set max accrual of vacation at 3 weeks. Once you accrue 3 weeks, you will not accrue any more until you use some of the time.

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  • I read that, but it wasn't clear to me whether vacation that is lost or would have been accrued needed to be paid out or not. I gather the answer is "no".
    – asgallant
    Feb 5, 2023 at 16:56

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