Demanding Scheduled Vacation Time – Is It Legal?

I did not want an excellent comment by Jayne Loughrey concerning accrued vacation to be buried in the comments section of an earlier post, so I’ve placed it here (see below).

We expect more details as to benefits – and how Heller management intends to administer them – to be included in the next communication, perhaps on Monday.  Check back here at Heller Highwater once the communication goes out and is analyzed by our group of experts.  We’re sure to post our thoughts soon after.

“I’m not a labor lawyer, but I do have some personal experience with WARN and employers’ obligation to pay accrued vacation. So, until the labor experts weigh in here, I thought I’d share a few thoughts.

As noted in the site link provided by Anonymous, as a general rule, employers can tell employees when to take vacation. It’s only common sense that on-going businesses need to be able to manage their business in an orderly fashion. What if all the Best Buy sales people wanted to take their vacation the week before Christmas? Employers have to be able to make sure vacations are scheduled to fit the needs of the business. But telling an employee when they can take their vacation is different than telling an employee that he must take a vacation, and it’s really, really different than telling an employee she must take a vacation after sending out WARN lay-off notices.

WARN obligations and accrued vacation/PTO obligations are two separate and distinct employer obligations. I’ve never heard of, and can’t find any authority for an employer trying to diminish its accrued vacation obligations by forcing employees to take vacation during a WARN notice period. The closest thing I could find was an article about how an employer can’t force employees to use their accrued vacation during a temporary shut-down without giving the employee at least nine months notice. The article cited to California Labor Code section 223.3, which states:

“Unless otherwise provided by a collective-bargaining
agreement, whenever a contract of employment or employer policy
provides for paid vacations, and an employee is terminated without
having taken off his vested vacation time, all vested vacation shall
be paid to him as wages at his final rate in accordance with such
contract of employment or employer policy respecting eligibility or
time served; provided, however, that an employment contract or
employer policy shall not provide for forfeiture of vested vacation
time upon termination. The Labor Commissioner or a designated
representative, in the resolution of any dispute with regard to
vested vacation time, shall apply the principles of equity and
fairness.”

Interestingly, this article was written Heller labor lawyers and posted on Heller’s website.http://www.hewm.com/en/news/industry/industry_1103.html

I’ve been mulling it over, but just can’t see how it’s fair or equitable for Heller to force some of the employees who it’s just notified it’s laying-off to use their accrued vacation just so it won’t have to pay them what they’ve accrued, what they’re owed. The WARN act says you have to either give employees 60 days notice of their impending lay-off or, if you want them to leave sooner, you have to pay them 60 days salary (on top of accrued vacation and whatever else they’re owed). The Heller WARN notice told employees there’s work for them and that they’re expected to show up. If Heller doesn’t need or want employees to show up, the fair and equitable thing to do is should pay them their 60 day WARN money and whatever else they’re owed, including accrued vacation. It is not fair and equitable to lower the amount owed and paid to some employees — just those with accrued vacation — by forcing them to to use up their accrued vacation.

I think it’s great that Heller management has acknowledged its WARN obligations, and I’d like to think this business about requiring employees to use up their vacation time is an inadvertent mistake or miscommunication because the idea is not just probably illegal and definitely unfair and inequitable, it’s also just downright cheesy. Putting the squeeze for a few more bucks on some of the loyal employees you’ve just told are going out on the street in two months doesn’t gibe with a genuine concern for your employees.

Of course Heller management could ask employees to voluntarily use up their accrued vacation, leaving it to each employee to decide without fear or pressure whether or not they want to make a contribution to the Heller shareholders capital restoration fund. As was pointed out above, according to the numbers that Larrabie gave out yesterday, Heller’s debt is about $50 million less than its expected accounts receivable collection. At the end of wind-down, after the debts and creditors are paid off, whatever is left presumably gets divvied up among the former partners– where else would it go? Of course I don’t know whether the shareholders will get all their capital and missed draws back, but using the numbers Larrabie gave, and adding in Heller’s other assets, including the value owed to Heller for business taken to other firms, it seems like there should be quite a bit of money for the shareholders. So I’m not sure why any employee would want to give away their accrued vacation, moreover I certainly hope Heller doesn’t descend to a level of weaselry where it tries to force its employees to do so.”

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6 Responses to “Demanding Scheduled Vacation Time – Is It Legal?”


  1. 1 elsewhere 27 September 2008 at 8:16 pm

    Just a minor point — you’re certainly right to be concerned about losing vacation pay, but the law in other states where Heller operated is likely different from in CA. I’m not positive about the states that are relevant here, but most states DON’T require vacation that is accrued but not used to be paid out on termination or resignation. If the same language was used in all of the WARN notices, it could have been directed to the non-CA folks (hence the “where applicable”). If the law in your particular state doesn’t require accrued vaca time to be paid out, there’s something to be said for taking vacation if asked… (Why work if you can be on vacation?)

  2. 2 hellerdrone 28 September 2008 at 6:54 am

    Our panel of experts is working hard today, Sunday, to identify the labor and wage laws in each state where the S.S. Heller Ehrman has a port of call and to see what the past practices by Heller management for terminated employees in each of those states.

  3. 3 Jayne Loughry 28 September 2008 at 12:42 pm

    Elsewhere, I don’t know whether or to what extent the obligation to pay accrued vacation is different in states other than Heller’s home state of California. As a general matter, however, of course you’re right that labor laws can differ by state. I do know that Brobeck, with offices in New York, Texas, Colorado, Virginia, and DC — besides those in California — was ultimately compelled to pay accrued vacation/pto to all its employees.

    I guess I’m assuming that, after all the talk of Heller’s special culture, Heller’s wind-down management and shareholders won’t try to save a few bucks for themselves by discriminating against (aka, shafting) those loyal employees who work in offices outside of California. A situation like this can be seen as a test of character– as well as intelligence. The question isn’t solely what the law might let you get away with, but rather what is the right and smart thing to do. I continue to believe that most, if not all, of the Heller shareholders have both the character to do the right thing, as well as the intelligence to recognize that squeezing a few extra bucks out of their employees is not worth risking potentially awful consequences for their employees and perhaps for themselves.

    I believe they are smart enough to know that, especially in chaotic times, making good decisions is incredibly important. Some decisions might be — or appear to be — beneficial to them in the short run, but if the benefits are at the expense of the employees, then there likely be bad consequences for them in the long run. Bad decisions come back to bite or haunt. A couple of Brobeck examples:

    First example: In the years following Brobeck’s destruction, I heard not only from former employees, but also a lot of former Brobeck clients and vendors, companies that were so appalled by how the Brobeck partners had behaved toward their employees that these clients and vendors didn’t want to have anything to do with the Brobeck partners or their new firms. Not exactly the public image lawyers or law firms want to have. Of course there are lots of companies who don’t give a fig about law firm employees being mistreated, but I heard from enough that do, and saw enough of what happened to the Brobeck partners once they were dragged into bankruptcy court, to conclude: For every buck you let be squeezed from your employees, you’re going to lose at least two out of your own pocket.

    Second example: One of the many ways Brobeck squeezed its employees was by not providing COBRA to employees laid-off from offices outside of California. So hundreds of folks around the country were suddenly out of a job (no WARN notice/severance), their health insurance was cut-off, and they couldn’t get COBRA. This discrimination against the non-California employees was probably lawful and, in the short run, probably freed up a few bucks to be used in paying down the partners personal liability to the banks, but it caused serious problems for some employees and had terrible consequences for at least one employee. Leda Mora was an administrative staffer in Brobeck’s New York office for 18 years. A couple of weeks after Brobeck put everyone on the street, Leda was diagnosed with cancer. A single mom of an 8 year old: No job, no severance, no life insurance, 401K account frozen, fighting for her life with no health insurance, and no COBRA. She died about 18 months later. Now nobody thinks the Brobeck partners caused Leda’s cancer, but it’s hard not to wonder whether she might have survived had she not been deprived of COBRA just because she worked in New York instead of California. Maybe having COBRA wouldn’t have saved her life; maybe it would just have given her more time with her son; or maybe it would have just made her remaining life a bit easier. I don’t know, but I do know I’m not the only person on the planet who believes each of the Brobeck partners should be deeply ashamed of themselves for letting their Vichy management deprive Leda and the other non-California employees of COBRA.

    I hope I am right in believing the Heller management and shareholders are smarter and have more character. I believe they know treating all their employees with equal fairness — regardless of what the law might allow them to do — is not only the right thing to do in the short run, but it’s also the best thing to do in the long run.

  4. 4 Eddie 28 September 2008 at 7:06 pm

    Wow … just, wow. Jayne, you know that COBRA is a federal law, right?

  5. 5 Jayne Loughry 28 September 2008 at 7:54 pm

    Yes, Eddie, I know, but that didn’t stop the weasels from looking for ways around COBRA, ERISA, and other obligations to the employees. Worse yet, they used Brobeck money to hire lawyers to help them shaft the employees. Sad, sick saga.

  6. 6 JA 3 October 2008 at 9:03 am

    I’m not a lawyer but thought this may help. Unfortunately, it does not apply to non-california employees. Hope this helps:

    http://www.mondaq.com/article.asp?articleid=30901

    Payment of Wages.

    The California Labor Code requires that wages for nonexempt employees be paid at least twice a month. Bona fide exempt employees may be paid once a month. There are complicated statutory rules regarding the time of payment but, generally speaking, employers may use either bimonthly or biweekly payrolls for nonexempt employees.

    An employee in California who is terminated or discharged must be immediately paid all accrued wages and vacation pay. An employee who quits with more than 72 hours notice must also be paid all wages due and vacation pay upon quitting. An employee who quits with less than 72 hours notice must be paid all unpaid wages and vacation pay within 72 hours after notice of quitting. An employer who willfully fails to pay an employee on quitting of discharge in accordance with these rules is subject to “waiting time penalties” under Labor Code Section 203. Under this penalty statute, if an employee is discharged or quits and is not timely paid, his or her wages continue until full payment occurs, for a period not to exceed 30 days. Theoretically, if an employer “shorts” an employee even a small amount on a final paycheck, the employee can recover a full 30 days’ wages.4


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