Massachusetts Supreme Judicial Court Clarifies Parameters of Vacation Policies
The Massachusetts Supreme Judicial Court recently provided clarity on when employers must pay terminating employees for accrued vacation.
Under the Massachusetts Payment of Wages Statute, employers are required to pay terminating employees all "wages earned," including "any holiday or vacation payments due an employee under an oral or written agreement." Some employers, including the employer in Electronic Data Systems Corp. v. Attorney General (Mass. 2009), previously designed vacation policies to provide that any vacation granted to the employee was neither earned nor accrued, thereby eliminating the need to pay for unused vacation time. After being sued by a former employee, EDS took the position that no wages were due because under its "written agreement" (i.e., policy) such wages were not "earned."
The Supreme Judicial Court disagreed, holding that EDS' creative policy constituted just the type of "special contract" prohibited by the Statute. In doing so, it gave repeated and considerable deference to the statutory interpretation advanced by the Attorney General in its Advisory concerning vacation pay.
