Compliance/Best Practices Employment Law Legal Topics

Unlimited Vacation?

Some employers have stopped giving exempt employees a specific amount of vacation each year and have instead adopted “unlimited vacation” policies. This sounds like great news for employees, but it may actually be better news for employers.

Although the specifics vary, “unlimited vacation” policies allow exempt employees to take as much vacation as they wish subject to the satisfactory management of their work load and deadlines, the approval of their managers, and the demands of the business.

This sounds like it would be a great deal for employees, who would supposedly get broad discretion to decide when to take vacation and how much vacation to take without the need to ensure a sufficient bank of accrued time. But whether an exempt employee recognizes any greater benefit under an unlimited vacation policy than under a traditional accrual-based policy will depend largely on the extent to which he or she can actually take time off when desired.

As Dana Wilkie explains in her article Unlimited Vacation: Is It About Morale or the Bottom Line?, some employees don’t end up taking more time off than they would get at a company that offers limited vacation. She concludes that,

[although] the concept of unlimited vacation sounds pretty generous, in practice, some argue that it benefits a company’s bottom line more than it benefits the company’s employees.

One big downside for employees is that they won’t get cashed out for unused accrued vacation when they leave the employer. Of course, for employers this is a major plus of adopting an unlimited vacation policy—the employer avoids entirely the obligation to cash out unused vacation on termination because the employee hasn’t actually accrued any vacation. Employers also avoid the administrative tasks associated with recording the accrual and use of vacation leave.

Employers have implemented unlimited vacation policies with varying levels of success. Some have backed away: Kickstarter nixed its policy and Tribune Publishing quickly rescinded its policy following employee concern.

But others have found success with it. In his blog post on FastCompany, one CEO explains how his company’s switch to an unlimited vacation policy worked well and offered tips for other employers considering such policies.

Any employer considering an unlimited vacation policy should, at a minimum, consider how the policy will apply to otherwise unpaid leaves during which the employee has the right to use accrued vacation (see, e.g., 29 USC §2612(d)(2) (Family Medical Leave Act); Govt C §12945.2(e) (California Family Rights Act); 2 Cal Code Regs §11044(b)(2) (Pregnancy Disability Leave Law)) and explain in their policy any limits on the use of vacation during such leaves.

For more on vacation leave policies generally, turn to CEB’s award-winning Employee Leave Laws: Compliance and Litigation, chap 3.

Other CEBblog™ posts you may find useful:

© The Regents of the University of California, 2017. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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