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Is My Business Required to Offer Vacation Time to Employees?

Americans work too hard. Many people don't even take vacation time because they don't get vacation pay.

When employers do offer their employees the benefit of paid vacation, they usually do so voluntarily. Are employers ever required to offer paid vacation benefits?

Paid Vacation Time Not Required

Unlike health insurance benefits, the Fair Labor Standards Act and state labor laws do not required employers to offer any paid vacation benefits to employees.

Employers are able to and often do offer such benefits voluntarily. The employer can set how much and how often an employee accrues vacation time. Employers can cap the amount of vacation time accrued and set limits on how vacation time is redeemed. In general, there are little rules and restrictions regarding employer management of vacation time.

However, some states' labor laws do address the pay-out of vacation time when employment ends. About half of the states in the country, including California, Illinois, Massachusetts, and North Dakota, consider earned vacation time to be compensation. Therefore, the laws in these states require employers to pay out any accrued vacation time at the end of employment, regardless of the reason for the separation.

Also, in Montana, Nebraska, and California, it's illegal to require employees to use vacation time before a certain period or lose it. In most other states, use-it-or-lose-it policies are legal.

Paid Vacation Act

While there are currently no laws requiring employers to offer paid vacation time, there may be one coming in the near future.

A few years ago, Florida Representative Alan Grayson introduced a bill called the Paid Vacation Act (PVA). The PVA sought to amend the FLSA to require employer who have more than 100 employees to provide each employee with at least one week of paid vacation per year. The proposed bill specified that employers with more than 50 employees would have to provide at least one week, and employers with more than 100 would have to provide at least two weeks of paid vacation per year.

This law died in Congress and was not passed, but similar bills may appear in the near future.

If you are being sued for your company's paid vacation time policy, consult with an experienced business attorney for help.

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