Ever tried to take a vacation from work and things are just too busy? Perhaps it clashes with someone else’s vacation and they asked first, and work would be too short-staffed with you gone too. 

There is a crazy epidemic of unused vacation time in the United States:

https://www.cnbc.com/2018/11/20/us-workers-to-forfeit-half-their-vacation-time-this-year.html

That article talks about 200 million vacation days forfeited in 2018! For a frame of reference, there are currently about 128 million full time employees in America. That means the average person forfeited 1.56 days!

There are a lot of folks with vacation time (often called PTO – “paid time off”) that is accrued (earned) but unused. What happens to that time when you’re separated from your employer? 

The answer is that “it depends.” In Indiana, the default rule is that if you have earned vacation time, it is due at the next regular pay date following your separation. BUT your employer can publish in a manual, handbook, or contract that it’s “use-it-or-lose-it” time. 

If you care about “why” this is true, ordinarily we think of vacation time or PTO as “deferred compensation.” This means that you’ve earned it and you’ll collect it later. The manual / handbook / contract can change it so that it is something other than deferred compensation, and something more like a gift. If it’s deferred compensation, you’ve earned it and you must be paid. But the law doesn’t usually enforce a gift. 

So if you’re thinking about leaving your job and you have a bunch of banked vacation time, the first thing you should do is check with your employer’s manual / handbook / contract and figure out whether you get paid for the accrued-but-unused time when you separate. If you don’t quite understand or you’re not quite sure, it can be a good idea to contact a lawyer about this for a good interpretation. 

If the handbook says that accrued-but-unused vacation time is not paid out, make an effort to use up that vacation time before you separate! It’s not dishonest – you have EARNED that time. It’s part of your wages. 

If it says nothing, or you have no handbook, or it says that you get paid out your accrued-but-unused vacation pay, then you can make a choice. You can use it up or you can have it paid out. Sometimes that’s a nice “extra” on your way out the door to a new job. 

Bear in mind that using vacation time is basically always subject to your employer’s approval. 

Employees – If you leave a job and you’re entitled to have your accrued-but-unused time paid out and your employer doesn’t pay you – call a lawyer! There are stiff penalties against employers for doing that. They can be charged up to TRIPLE the amount of unpaid wages plus your attorney’s fees. 

Employers – this is a big incentive to make sure you do it right! If you get it wrong, the penalty can feel harsh. If you want to make sure that you get it right, help from a lawyer can go a long way.