The ability of an employer to require an employee to use vacation time is complex, depending heavily on the company’s policy and the laws of the state where the employee works. There is no federal law mandating that companies provide vacation time. However, once an employer chooses to offer this benefit, its application is governed by the terms the company sets and applicable state legal protections. Understanding the distinction between controlling the work schedule and managing accrued pay is essential.
The Legal Status of Vacation Time
Paid time off (PTO) in the United States is considered a voluntary benefit. The Fair Labor Standards Act (FLSA) does not require employers to provide any paid or unpaid vacation time. If a company chooses to offer PTO, it is doing so beyond what is legally mandated.
Since PTO is voluntary, the employer determines the terms of its accrual and usage through the employment contract, employee handbook, or established company policy. This gives the employer control over how the benefit is managed, including setting rules for when time off can be taken and establishing caps on accrual. The employer’s policy governs PTO usage, provided it complies with state law. The policy may define vacation time, sick leave, and personal days separately, or combine them into a single PTO bank.
Employer Rights to Mandate Scheduling
Employers generally possess the authority to require employees to use accrued vacation time. This power derives from their right to control the workplace schedule and meet operational needs. Since employers set the terms for PTO, they can dictate when an employee must take it. This authority relates to scheduling the time, not the permanent forfeiture of the earned benefit.
A company may mandate PTO use for legitimate business reasons, such as during periods of low business activity or economic downturns. For instance, some companies implement mandatory shutdowns during holidays, requiring employees to use accrued vacation days to cover the closure. This practice allows the company to reduce operational costs while compensating employees for the time off.
Employers commonly require employees to exhaust accrued PTO before taking an extended period of unpaid leave. This manages the company’s financial liability associated with accrued PTO. Furthermore, in highly regulated industries, such as financial services, employers may mandate that employees take a continuous, two-week vacation. This helps detect internal fraud or embezzlement, as these activities often require the perpetrator’s constant presence to conceal.
For salaried, exempt employees, the employer can require them to use accrued PTO for any absence, including a company shutdown, provided the employee receives their full, predetermined salary for the workweek. If an exempt employee has no accrued PTO to cover a mandatory shutdown, the employer must still pay the employee their guaranteed salary to maintain the employee’s exempt status under the FLSA.
State Protections Against Forfeiture
While employers can mandate the scheduling of vacation time, they are restricted in enforcing “use-it-or-lose-it” policies, which require employees to forfeit accrued time if unused by a specific date. The legality of forfeiture depends on whether the state considers accrued vacation time to be a form of earned wages, a distinction where state law overrides company policy.
States including California, Massachusetts, and Nebraska treat accrued vacation time as earned wages that vest as the employee performs labor. In these states, earned time cannot be forfeited, even upon termination or resignation. Upon separation from employment, employers in these jurisdictions must pay out the cash equivalent of all accrued and unused vacation time in the final paycheck.
Conversely, states like New York and Texas generally permit employers to establish use-it-or-lose-it policies, provided they are clearly communicated in the company handbook. If a policy explicitly states that accrued vacation time will be forfeited if not used by a certain date, or will not be paid out upon separation, the policy is often enforceable.
Even in states that prohibit total forfeiture, an employer can place a reasonable cap on the amount of vacation time an employee can accrue. Once this cap is reached, the employee stops earning new time until they use some of their existing balance, effectively managing the company’s financial liability without causing a forfeiture of already earned wages.
Required PTO Usage During Leave and Shutdowns
The employer’s right to mandate PTO usage extends to situations like job-protected leaves of absence or temporary business closures. Under the Family and Medical Leave Act (FMLA), which provides eligible employees with up to twelve weeks of unpaid leave, employers can require employees to use accrued vacation or sick time concurrently with the FMLA period. This substitution allows the employee to receive compensation during what would otherwise be unpaid leave.
To mandate this substitution, the requirement must be clearly outlined in the company’s FMLA or PTO policy. If the policy is silent, the employee generally chooses whether to use their accrued time. An exception applies if the employee is receiving compensation from another source, such as workers’ compensation or disability benefits. In these cases, the employer cannot unilaterally require the employee to use accrued PTO, though the parties may mutually agree to use PTO to supplement benefit payments up to the employee’s regular pay.
During a temporary company shutdown, an employer can require non-exempt, hourly employees to take the time off without pay, as the FLSA only requires payment for hours actually worked. If the employer chooses to pay these employees for the closure, they can require the use of accrued PTO to cover the wages. For exempt, salaried employees, the employer must still pay their full salary for any week in which the employee performs any work, even if the closure is brief.
Employee Recourse and Next Steps
Employees concerned about mandated PTO usage should first review their employee handbook or collective bargaining agreement. These documents contain the specific policies regarding vacation accrual, mandated usage, and payout upon separation, which determine employee rights. Consulting with the Human Resources department is also a suitable first step to seek clarification on how company policies apply.
If an employee believes their rights regarding the forfeiture or payout of accrued vacation time have been violated, especially in states where PTO is considered earned wages, they have several avenues for recourse. The initial step is to document all relevant information.
Documentation
The company’s PTO policy.
Paycheck stubs showing accrual balances.
Any communication related to the dispute.
This documentation is essential for pursuing a claim. A formal complaint can be filed with the state Department of Labor or the state agency responsible for wage and hour enforcement. These agencies investigate the claim and can require the employer to pay out wrongfully withheld wages, potentially with penalties. For complex disputes or concerns about retaliation, consulting an employment law attorney specializing in wage claims can provide guidance on legal steps, which may include filing a lawsuit to recover the owed compensation.