Can Your Boss Pay You With Vacation Time Instead of Cash?

It goes without saying that if we work, we expect to be paid. Many people mistakenly believe that if they have no written contract or agreement, they have no way to enforce their right to payment against employers who may fail to live up to their payment obligations. In fact, the Fair Labor Standards Act (FLSA) provides rights to payment for certain workers to be paid, which are enforceable under federal law.

Calculating Pay under the FLSA

With some exceptions, the FLSA requires workers to be paid for their regular time worked, and also requires payment of time and a half of their regular rate for working more than 40 hours a week (overtime).

The FLSA does not allow an employer to “substitute” your pay, with either vacation time, or buyback of unused time. If you worked time, the FLSA requires you be paid for it. But vacation and sick time do play a large role in FLSA cases.

In FLSA cases, a big area dispute is what the regular rate of pay actually is for an employee, especially when the employee is on a set salary and not a fixed hourly amount. The FLSA states that the rate of pay is what the employee is paid for time actually worked.

In many cases, salaried employees may be paid while they are sick or on vacation. A big question thus becomes how to calculate vacation/sick time when figuring out an employee’s regular rate of pay.

Including Vacation Time in the Regular Rate of Pay

Mathematically, if an employee’s salary is divided by all his work hours—including vacation and sick time—the employee’s average hourly rate is lower, and thus, the employer may owe less under the FLSA. If the vacation/sick time is excluded, the hourly rate is higher, allowing an employee to recover more in an FLSA suit.

Courts have been generally leaning towards excluding the vacation/sick time from FLSA calculations. This is even if employees are paid for vacation/sick time, as salaried employees often are.

In some cases, employers will “buy back” unused sick or vacation time. There is generally no legal consensus on how payments for unused sick/vacation time is calculated.

It’s important to remember that this all relates to the amount of your damages under the FLSA—not whether you’re entitled to bring a claim or not. Certainly, calculation of vacation and sick time can make a huge difference in the amount of recovery, especially when dealing with time and a half overtime. But you shouldn’t be overly caught up in how your vacation/sick time was treated or paid to you. That’s something your lawyer will help you with.

Does your employer owe you salary or overtime pay? The employment and consumer attorneys at Keogh Law may be able to help. Contact us today at 866-726-1092 to discuss your current or former employment situation.

Our Location

Based in Chicago, Keogh Law, Ltd., represents clients in Illinois communities such as Orland Park, Calumet City, Hammond, Aurora, Naperville, Oak Brook, Schaumburg, Glenview, Skokie, Waukegan, Joliet, Bolingbrook, Cook County, DuPage County, Kane County, Lake County, LaSalle County and Will County. We also represent clients nationwide.

Please call us now. We handle a majority of our cases on a contingency basis.