What Are Use-It-or-Lose-It Employee Vacation Policies?

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When defining a “use or lose it vacation policy” it generally means that if you don’t use your vacation or personal leave time by a pre-determined expiration date, you will lose the accrued time, and you won’t be paid for the unused time-off. However, certain state laws, union agreements, and contracts regulate eligibility in some circumstances for accrued vacation days.

State Law on Vacation Policies

No federal or state laws mandate vacation time, either paid or unpaid. However, many companies provide it to increase company morale and employee wellness, while also remaining competitive with other hiring companies. Once a company provides vacation time to employees, it then becomes subject to the applicable laws in the employer's state.

Employers in all states except California, Montana, and Nebraska have the right to set a date by which employees must take their accrued vacation. Employers can stipulate that employees who don't take vacations by this date will forfeit the accumulated time-off.

However, in several states, including Massachusetts and Illinois, statutes indicate that employees must be afforded a reasonable opportunity to take accrued vacation time prior to the deadline for forfeiture.

In California, vacation pay is considered to be another form of wages and as such cannot be taken away from an employee under any "use it or lose it" scenarios. If California employees get terminated or otherwise separate from their employment, they receive any accrued vacation time paid out in dollars.

Union Agreements and Personal Contracts

Union agreements or personal contracts may have stipulations to provide employees with some protections from losing accrued time off. This typically becomes part of a collective bargaining agreement.

Employer Company Policy and Communications

Employers should advise employees about the vacation policies their organization has in place. "Use it or lose it" policies need to be clearly communicated to all workers in employment manuals. Whenever possible, staff should be given a reasonable opportunity to use their time off even when not required to by state law.

Options for Taking Vacation Time

Employees can benefit from making every effort to plan vacations well in advance to reduce the likelihood that they won't be able to use up all of their time. This may involve finding other employees to cover your work if you need to take time off on short notice, or as a deadline approaches for using up your vacation.

If an employer requires you to work during a planned vacation period due to unforeseen work demands, try to negotiate with your supervisor for a carryover of your time or some accommodation and ask them to put the agreement in writing.

Using Your Vacation Leave

If you're not using all your vacation time, you're not alone. A CareerBuilder survey reports that many employees don't use all their vacation time, and about a third of all workers check email or check in with the office while away on their vacation.

  • Thirty-three percent of workers said they won’t be taking a vacation this year, down slightly from 35 percent last year.
  • Three in 10 workers still stay connected with work during vacation.
  • Nearly one in five, or 17 percent, left vacation days unused in 2016.
  • Thirty-one percent of surveyed employees check work email while away and 18 percent check in with work.

If you're one of the people who always seem to have leftover vacation at the end of the year, check on your company's policy regarding payment for unused leave time. If you can't use it all, you may be able to get paid for some or all of the time off you didn't use up.

Pay for Vacation Time When Your Employment Is Terminated

In some states, employees who terminate employment or get fired by an employer are legally entitled to payment for any vacation time which has been accrued prior to any "use it or lose it" cut off dates. Even if such laws aren’t in place in your location, employers may be required to compensate terminated employees for unused vacation if indicated by company policy.

The information contained in this article is not legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law.