Vacation Time Owed Must be Calculated When Employment Ends

In Grady v. Choices of Louisiana, Inc., — So.3d — (La. App. 5 Cir. 3/12/14), Plaintiff Tisha Grady was hired as a licensed practical nurse with Choices of Louisiana, Inc., an opioid treatment center. Ms. Grady was hired before July 1, 2010, and she was eligible for 40 hours of vacation time as of January 1, 2011. Ms. Grady was terminated for allegedly violating policies of the company, and she did not use any of her vacation time in 2011.

The employment manual provided that full-time employees who work at least 40 hours per week are eligible for paid vacation time. An employee hired prior to July 1 of any calendar year will be eligible for the available vacation effective the first day of January following the date of hire. The employee manual further provided that “an employee may use their entire year’s worth of vacation beginning each January 1. We do this because we believe the employee will be with us the entire year. However, paid vacation is something earned over time. Should an employee leave our company before December 31, his or her vacation will be prorated by the number of weeks she or he has worked during the year…If eligible for 40 hours of vacation, one earns .77 hours per week worked.”

Upon termination, Choices determined Ms. Grady’s vacation time as 13 hours of vacation pay by calculating the number of weeks worked in 2011 and crediting her with .77 hours per week. Ms. Grady demanded the full 40 hours of vacation time. The trial court granted Ms. Grady’s summary judgment for unpaid wages (27 hours of paid vacation time), 90 days of penalties wages, and attorney’s fees. The employer appealed the decision.

Employment Policies Determine Amount Due

The Louisiana Fifth Circuit Court of Appeal in a 4-1 decision reversed the decision of the trial court. The Court’s majority relied on the clear language of the employment manual to conclude that Ms. Grady was not entitled to payment for the full 40 hours of vacation pay. “If the vacation pay has not yet accrued as of the date of termination, it is not an ‘amount then due’ that is required to be paid under La. R.S. 23:631.” Choices’ policy of prorating an employee’s vacation is not prohibited by statute or otherwise against public policy. Thus, Ms. Grady was only entitled to 13 hours of accrued vacation pay. Because Ms. Grady was properly paid vacation time, she was not entitled to penalty wages or attorney fees.

In its dissent, the Court relied on language in the manual that a “full-time employee who worked, at least, 40 hours per week were eligible for paid vacation time.” The “New Employee” section of the manual was devoid of any language referring to the proration of any vacation pay based upon the length of employment. The proration language was only included under the section for “Other Employees.” In the absence of a clear written policy establishing that vacation time granted by an employer to an employee is nothing more than a mere gratuity and not a wage, accrued but unused vacation time is a vested right for which an employee must be paid upon discharge or resignation. Chapman v. Ebeling, 41,710 (La. App. 2 Cir. 12/13/06), 945 So.2d 222, 226, citing Wyatt v. Avoyelles Parish School Board, 01-3180 (La. 12/4/02), 831 So.2d 906. The dissent considered the clear and unambiguous language of the manual to conclude that Choices was not entitled to prorate Ms. Grady’s vacation pay.

Employers Should Review Employment Policies for Consistency

The important take away from this case is not necessarily the conclusion reached by the Court, but the importance of a clearly drafted employee handbook. The majority and dissent relied on the clear and unambiguous language of the employment manual, which highlights the importance of clarity when drafting provisions regarding the accrual of vacation policies. Lack of clarity in an employment handbook can lead to contested litigation, and a well-drafted policy handbook can mitigate the risk of that litigation. Based on the foregoing case, employers should review their policy handbooks to ensure that their policy accurately reflects their employment practices.

Allen & Gooch is providing this legal update for informational purposes only. This article should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. You should consult your own attorney concerning your particular situation and any specific legal questions you may have.