Is this the year you quit your job and find a new one? Maybe your contract was terminated (for whatever reason). No matter the situation, you will have all kinds of questions. One will be “Do companies pay out vacation time when you quit?”
I’m here to answer that for you. Moreover, I’m here to tell you everything you need to know about Paid Time Off (PTO), including which states require PTO payouts. This way, you’ll know your rights. So let’s get straight to it!
Read More: Putting In Resignation: Do’s and Don’ts
What Is PTO?
PTO stands for Paid Time Off. This means you can take a leave from work and still get paid for the hours you’re not at work. This is an employer’s way of providing well-being to their workers.
Now, you can take advantage of PTO for the following:
- Sick leave
- Holiday leave
- Vacation leave
- Personal leave
- Family leave
- Medical leave
You can also gain accrued vacation time depending on the company’s policy. Here’s how Neil Shouse, a personal injury attorney at Shouse California Law Group, puts it:
Employers tend to calculate how PTO accrues in their company policies. Workers usually build PTO at a rate based on how long they have been on the job, calculated by hours, days, weeks, or pay periods.
Is PTO Required by Law?
No, paid vacation is not required by any state or federal laws (although some state laws require sick leaves). However, employers know that employees will be faithful and work harder if they’re happy (a study by Forbes showed that happy employees become more productive by 20%).
What’s one way to make workers happy? That’s right, Paid Time Off. Since that’s the case, most companies implement PTO policies. Today, it’s hard to find a company that doesn’t provide paid vacation and sick leaves (An SHRM survey showed that 99% of American workers have paid vacation leaves and 96% have sick leaves).
Do Companies Payout PTO When You Quit?
OK, let’s go back to your dilemma. You’re going to quit your job but you didn’t use up your accrued amount of vacation pay. Does your employer have to pay you for unused vacation time?
Quick answer: It depends on company policy and state law.
For the most part, PTO payouts will solely depend on the company’s written policy. You can check your employment contract, the company’s employment handbook, or talk to the HR manager.
If the policy says that unused vacation is paid when you quit, then your employer must pay it. If they don’t, you can file a lawsuit against them for breaking the contract.
If the policy says that there’s no need to pay out any unused vacation days, then the employer can decide what to do with it. In this case, you can’t demand unused PTO to be paid when you quit.
BUT! Some states have laws that say employers are required to pay earned vacation upon termination. In these states (I’ll mention them below), the employer MUST pay employees for unused accrued vacation pay and sick time.
Here is a list of the states that require (by law) employers to provide earned and unused vacation pay upon separation:
- California
- Colorado
- Illinois
- Indiana
- Louisiana
- Massachusetts
- Nebraska
- North Dakota
- Rhode Island
NOTE: These state laws can change over time. It’s best to do your research for the specific state when you leave your job and want to get paid for PTO time that you didn’t use.
Now, each state law provides a middle ground. Here’s how Shouse explains it:
Many of these states have specific conditions for when an employer can withhold payment for accrued PTO. For example, in North Dakota, an employer can only refuse to pay for unused PTO if the employee left voluntarily, provided less than 5 days’ notice, had only worked there for less than a year, etc… Similarly, both Colorado and Indiana allow employers to condition when a departing employee will receive payments for accrued but unused vacation time.
Vacation Pay and Two Weeks Notice
You might be wondering, “If I give two weeks’ notice, do I get my vacation pay?” The answer will again depend on the company policy (if not by state law). Here’s what Robert Shea, an experienced employment lawyer, says:
If you prefer to use your accrued vacation during your 10-day notice period, you may be able to do so but your vacation time request presumably will be subject to your employer’s policy for approving vacation time requests. Most employers have a policy that vacation days must be pre-approved before they can be taken. Potentially, your employer may decide not to approve your vacation request because they want you to be at work during the 10-day notice period to assist in transitioning your job responsibilities.
To avoid this situation, you can use your paid leave before you send in your 2-weeks notice.
Read More: Can You Use PTO During Your 2-Week Notice?
What Is the Use-It-Or-Lose-It Policy?
In the states that don’t require PTO payout, an employer may choose to have a use-it-or-lose-it policy. What’s that?
Well, if you don’t use up your accrued PTO, you’ll lose it all once it passes the stated end deadline (usually at the end of the year). This is why you may have heard some friends or family using up all their leaves just before the year ends or before they send their 2-weeks notice. In the latter case, they usually use the time to look for another job or take a break while still earning.
If this is your employer’s policy, you should take advantage of your paid leave before it expires. If it’s not in the policy, then your employer must pay you when you quit, even if you didn’t use up your PTO.
To be sure, the use-it-or-lose-it policy is prohibited in some states that have a PTO payout law. You can check which states prohibit this below.
Read More: What To Say When Giving Notice To Your Boss?
PTO Payout Laws by State
Do companies pay out vacation time when you quit? Here is a complete list of PTO payout laws by state:
| State: | PTO Payout Required by Law: | Use-It-Or-Lose-It Policy Allowed: | Additional Information: |
| Alabama | No. Employers must follow their policies. | Yes | If a company has a set vacation policy, they can’t change it without telling employees first. If the employer chooses not to pay for unused vacation when someone leaves, they have to let the employee know ahead of time. |
| Alaska | No. Employers must follow their policies. | Yes | Whether you get paid for unused vacation when you leave depends on what the employer has decided in their policy or agreement. |
| Arizona | No. Employers must follow their policies. | Yes | If a company regularly pays employees for earned vacation, it’s considered part of their wages. Whether you get paid for unused vacation when you leave depends on what the employer has decided in their policies or agreements. |
| Arkansas | No. Employers must follow their policies. | Yes | Whether you get paid for unused vacation when you leave depends on what rules or agreements the employer has set. |
| California | Yes | No | Unused vacation time is considered earned wages and must be paid when employment ends, regardless of the reason for leaving, at the final rate of pay. In California, it’s not allowed to force employees to use or lose vacation by a certain date, but employers can set a reasonable limit on how much vacation time can be accrued. |
| Colorado | Yes | No | If your employer provides paid vacation, they have to pay you for all the vacation you earned when you leave, as outlined in your agreement with them. |
| Connecticut | No. Employers must follow their policies. | Not addressed by state law | If your employer’s policy or a collective bargaining agreement says they should pay you for unused benefits, like vacation, when you leave, and you don’t get these benefits, you should be compensated for them, except for regular pension benefits. This compensation will follow the rules in the agreement or policy. |
| Delaware | No. Employers must follow their policies. | Not addressed by state law | If an employer agrees to give vacation pay, they have to make the necessary payments within 30 days after they’re supposed to be paid. |
| District of Columbia | No. Employers must follow their policies. | Not addressed by state law | If your employer includes vacation pay as part of your earnings or doesn’t have a rule against it, they should give you that pay when you leave the job. |
| Florida | No | Not addressed by state law | Not addressed by state law |
| Georgia | No | Not addressed by state law | Employers don’t have to give vacation pay before or after termination. |
| Hawaii | No. Employers must follow their policies. | Not addressed by state law | Employers need to give written vacation policies to you or post them in an easy-to-find place. If there are any changes to these policies, employers must provide them in writing before the changes take effect. |
| Idaho | No. Employers must follow their policies. | Not addressed by state law | Vacation pay policies are something you and your employer need to agree on. You should be told about any changes to the policy before they happen. |
| Illinois | Yes | Yes | Your employer has to pay you for all the vacation time you earned but didn’t use when you leave the job, whether you quit or are let go. |
| Indiana | Yes | Yes | If your employment contract says you need to meet specific conditions to get paid for earned vacation, those conditions still apply if you’re terminated. |
| Iowa | No. Employers must follow their policies. | Not addressed by state law | You’ll only get paid for unused vacation if your employer has a contract, agreement, policy, or procedure that says so. |
| Kansas | No. Employers must follow their policies. | Yes | If your employer has a policy that lets you earn vacation pay only after a certain anniversary date, they might not pay you if you stop working before that date. |
| Kentucky | No. Employers must follow their policies. | Not addressed by state law | If your employer provides vested vacation pay, they have to treat it like regular wages and pay it when you leave the job. |
| Louisiana | Yes | Yes | Your employer can’t make you sign a contract or policy that takes away your earned wages when you leave, including vacation pay. If you’re terminated, they have to compensate you before the next payday or within 15 days (whichever is sooner), or they could owe you 90 days’ worth of wages at your normal rate. |
| Maine | No. Employers must follow their policies. | Yes | Your employer only has to pay you for accrued vacation when you leave if they have a policy saying so. |
| Maryland | No. Employers must follow their policies. | Not addressed by state law | If your employer didn’t tell you at the start that you’ll lose your accrued vacation when you leave, you can ask for the pay. If there’s no written policy saying you’ll lose vacation pay, you’re entitled to the full cash value of your accrued vacation pay. |
| Massachusetts | Yes | Yes | Your employer has to tell you in advance if there’s a use-it-or-lose-it policy for vacation time so you have time to use it. When you leave the job, they must treat your vacation pay like wages, and they can’t avoid paying you for the accrued vacation. |
| Michigan | No. Employers must follow their policies. | Not addressed by state law | You should get all your fringe benefits as per contracts or written policies. Vacation pay, however, isn’t seen as wages. |
| Minnesota | No. Employers must follow their policies. | Not addressed by state law | When you’re supposed to get benefits depends on your employer’s policy. If they don’t pay what’s owed, you can file a claim. |
| Mississippi | No | Not addressed by state law | Your vacation pay when you leave is decided by your employment contract. |
| Missouri | No | Not addressed by state law | Your wages don’t cover vacation pay. |
| Montana | No. Employers must follow their policies. | No | Your employer’s policy decides how much vacation pay you get when you leave. Even though use-it-or-lose-it is not allowed, your employer might have a cap on how much vacation time you can accumulate. |
| Nebraska | Yes | No | You should get all your accrued vacation pay when you leave unless you and your employer or your employer and the collective bargaining representative agreed on something different. This agreement must be signed either at the start of your employment or at least 90 days before you leave, whichever comes later. |
| Nevada | No. Employers must follow their policies. | Not addressed by state law | You won’t be paid for unused vacation unless your employer rehires you within 90 days after you leave and you didn’t leave your job voluntarily. If that happens, they have to give you back any unused vacation time. |
| New Hampshire | No. Employers must follow their policies. | Yes | You’ll only get vacation pay as wages if your employer’s policy says it’s due. |
| New Jersey | No. Employers must follow their policies. | Not addressed by state law | If your employer decides to give you vacation pay, they have to do it consistently and following set policies or agreements. |
| New Mexico | No | Not addressed by state law | There’s no law that says your employer has to pay you for vacation. |
| New York | No. Employers must follow their policies. | Not addressed by state law | If your employer has a written policy saying you’ll lose vacation pay when you leave, they can do that. But if there’s no written policy, they have to pay you for any accrued vacation time. |
| North Carolina | No. Employers must follow their policies. | Yes | Your employer has to put in writing how you earn vacation pay, what happens to it when you leave, and if there are any policies about using it or losing it. |
| North Dakota | Yes | Yes | When you leave your job, your employer has to pay you for all the vacation time you’ve earned, unless certain conditions apply. If you resign on your own, your employer can withhold vacation pay if they gave you written notice when you started, you’ve worked for less than a year, or you gave less than five days’ notice. A private employer can also withhold vacation pay if it was granted but not yet earned, or if they notified you before granting the vacation pay. For policies where you lose unused vacation if not used, your employer must inform you and give you enough time to use it. |
| Ohio | No. Employers must follow their policies. | Not addressed by state law | Whether you get paid for unused vacation when you leave depends on what your employer’s policy or agreement says. |
| Oklahoma | No. Employers must follow their policies. | Yes | You’ll only get paid for unused vacation when you leave if your employer’s policy says so. |
| Oregon | No. Employers must follow their policies. | Not addressed by state law | Your vacation pay is like a deal between you and your employer about wages. Your employer only has to give you vacation pay or pay you for unused vacation if it’s mentioned in your agreement. |
| Pennsylvania | No. Employers must follow their policies. | Not addressed by state law | Your employer doesn’t have to give you vacation pay or pay for unused vacation unless it’s mentioned in an agreement. |
| Rhode Island | Yes | Not addressed by state law | Once you’ve been working for a year, any vacation pay you’ve earned turns into wages and should be paid to you when you leave the job. |
| South Carolina | No. Employers must follow their policies. | Not addressed by state law | Your employer needs to inform you about the vacation pay policy and must stick to it without making any changes. |
| South Dakota | No | Not addressed by state law | Not addressed by state law |
| Tennessee | No. Employers must follow their policies. | Not addressed by state law | You only get paid for unused vacation when you leave if your employer has a written policy that says so. |
| Texas | No. Employers must follow their policies. | Yes | Your employer should make a clear vacation pay policy that tells you if you’ll be paid for any unused vacation when you leave the job. |
| Utah | No. Employers must follow their policies. | Yes | Your employer has to make a policy for vacation time and stick to it. If they want to have a use-it-or-lose-it rule, they must clearly mention it in their policy, or they’ll have to pay you for any unused vacation time. |
| Vermont | No. Employers must follow their policies. | Not addressed by state law | Your employer isn’t obligated to pay benefits when you leave. However, if there’s a written agreement for vacation pay, they have to fulfill the benefits mentioned in that agreement. |
| Virginia | No. Employers must follow their policies. | Yes | Whether you get paid for unused vacation when you leave depends on your employer’s policy or the contract you have with them. |
| Washington | No. Employers must follow their policies. | Not addressed by state law | Your employer can choose to give you benefits through a policy or agreement, but it’s not mandatory. If they have a policy, they have to stick to it. |
| West Virginia | No. Employers must follow their policies. | Not addressed by state law | If your employer decides to provide vacation pay, they need to have a written policy. They can change it by giving everyone notice. If they change or stop the policy, you should be able to use the vacation time you earned before. Also, they might pay benefits to some employees and not others if it’s in their policy. |
| Wisconsin | No. Employers must follow their policies. | Not addressed by state law | Your employer can decide to make a benefits policy, but it’s not necessary. If they have a written vacation policy without a written forfeit policy, they must pay you for any unused vacation when you leave. |
| Wyoming | No. Employers must follow their policies. | Yes | Your employer doesn’t have to pay you for unused vacation time when you leave if they have a written policy stating so, and you are aware of that policy. |
Final Words
Do companies pay out vacation time when you quit? That will depend on company policy and state law. If the policy or law says that PTO payouts are required, then you can claim your unused accrued paid time off (with a few exceptions). If not, then you cannot demand it.
For specifics about your state laws, check out the complete table I provided above. This will help you navigate your way through PTO payouts and use-it-or-lose-it policies in every state.
No Comments