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Use-It-or-Lose-It Pay Plan for Vacations May Be Legal

August 20, 2000

Q: My employer switched to a use-it-or-lose-it vacation policy in 1998. When asked if the policy was legal, the employer stated that it conforms to federal law.

With its corporate headquarters in another state, are my employer's California operations covered by state law? Would federal law supersede state law in this case?

--G.P., Brea

A: California law regarding vacation pay applies to any employees located in the state, regardless of where their employer is located.

There is, however, an exception for employers who have adopted a vacation pay plan that complies with federal employee benefits law, the Employee Retirement Income Security Act. If your employer has done so, federal law applies to its vacation pay plan, and it is permitted to maintain a use-it-or-lose-it vacation pay policy even though state law would prohibit it.

--Michael A. Hood

Employment law attorney

Paul, Hastings, Janofsky & Walker

Advice on Handling Inaccurate Time Cards

Q: The bank I work for recently reclassified support staff from exempt to nonexempt status to comply with the overtime law.

These employees fill in their time cards manually and report hours worked in a less than forthright manner. As an example, the department secretary signed in at 7:45 a.m., when in reality she walked into the office very late at 8:40 a.m.

It's my responsibility to approve these hours for the bank's online payroll system. I can't in good faith do so and have expressed this concern to both the department manager and region manager.

As an employee with a conscience, where does this leave me legally?

--B.S., San Marino

A: Although the law would protect you from retaliation in the event you complained that employees were being paid less than they are rightfully due, there is no protection under the law for your complaints that the bank is paying its employees more than they deserve.

Your best course of action would be to ask your manager how he or she wants you to handle a time card you know to be inaccurate--should you correct it, sign off on the incorrect entry or pass on the incorrect card to management? Then follow your manager's instructions.

Although it may seem odd to you, some employers prefer, for morale reasons, not to confront employees about inaccurate timekeeping.

You say that your bank recently reclassified these employees from exempt to nonexempt. It could be that your bank's management has decided to give the newly classified employees a grace period of sorts to get used to the new procedure.

--James J. McDonald Jr.

Attorney, Fisher & Phillips

Labor law instructor, UC Irvine

No Salary Owed After At-Will Termination

Q: I turned in my resignation and gave my employer two weeks' notice. The next working day I was officially terminated and was asked to leave the premises.

When I received my last paycheck, I found that my employer had classified my last two weeks as vacation and had deducted the days from my accrued vacation days. Because my employer decided not to have me work the last two weeks, is the firm legally obligated to pay me the last two weeks as salary, in addition to all my vacation?

--C.H., San Juan Capistrano

A: No. In the absence of a contractual obligation or evidence of a discriminatory or other illegal motive, your employer was free to terminate your employment "at will," which it apparently did when you submitted your resignation.

Once that decision was made, you were not entitled to any salary during your anticipated two-week-notice period.

Employees often must make a risky choice before resigning. Should they provide reasonable notice to their employer in a conscientious effort to mitigate the potential setbacks of an unannounced resignation? If the employee does so, he or she risks the negative consequence you suffered--an unplanned and premature termination and the loss of salary during the anticipated notice period.

But if the employee decides to resign with little or no notice to minimize the potential loss of pay, it may put a burden on the employer and could ruin an excellent future reference.

--Don D. Sessions

Employee rights attorney

Mission Viejo

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