Unpaid Vacation Time

North Carolina vacation pay laws do not require an employer to provide you with either paid or unpaid vacation time. However, if your employer does have an established policy, practice, or agreement to provide paid vacation, then certain restrictions are placed on the employer as to how they fulfill their responsibility to provide vacation pay to you.

Our firm recently resolved a case in which the employee had accumulated almost $30,000.00 in unpaid vacation time. The employer refused to pay him the unpaid vacation time funds when the employee left the company. We settled the case for $65,000.00.

Some employers combine vacation and sick leave plans into a “paid time off” (PTO) policy. These paid days off can be governed in the same way as vacation policies alone. Whenever the employment relationship ends, if you have not used all of your earned and accrued vacation or “paid time off,” the employer must pay you at your final rate of pay for all of your earned and accrued unused days unless there is a written policy that clearly explains how your earned vacation can be taken away.

If your employer provides for vacation pay or PTO, it must have a written policy that clearly explains how the time is earned and how it can be taken away. Under North Carolina vacation pay laws, your earned vacation time or PTO is considered wages, and the vacation time is earned, or vests, as labor is performed.

For example, if you are entitled to four weeks (20 work days) of vacation per year, after six months of work, you will have earned 10 days of vacation. Vacation pay accrues as it is earned and should not be forfeited, even upon termination of employment, unless the policy has a provision to the contrary. Unlike “sick pay,” the North Carolina Department of Labor takes the position that vacation pay needs to be paid upon termination unless there is a written policy that states that vacation pay will be forfeited. Such unused vacation time should be paid to you at your final rate.

Employers can restrict vacation benefits that prevent you from earning vacation over a certain amount of hours. Further, employers can provide specific periods at the beginning of employment during which you do not earn any vacation or PTO benefits. Unlike some states, an employer’s vacation policy can provide that all accrued vacation hours unused by the year’s end will be forfeited.

As with commissions and bonuses, vacation pay or PTO are considered wages. Not paying an employee their wages can significantly impact their family’s well-being. Therefore, employees who have unlawfully had their vacation pay or PTO withheld may be entitled to liquidated damages (“double damages”). We usually handle North Carolina vacation pay laws cases on a contingency basis, meaning no attorney fees are owed unless we recover compensation for you. Maginnis Howard handles such cases throughout North Carolina.