In a landscape heavily impacted by COVID-19 and recent legal decisions, California employers will want to ensure they are navigating the intricacies of vacation pay and accrual in compliance with the law. An essential detail to effectively handle these situations lies in understanding a recent Ninth Circuit panel ruling.
The decision, Harstein v. Hyatt Corporation, addressed an issue that many employers have faced during the pandemic – the payment of accrued vacation time for employees “laid off” as a result of COVID-19. Specifically, the court held that employees who were laid off at the onset of the pandemic in March 2020 were entitled to payment for accrued vacation time at the time of their lay-off, even though they weren’t officially terminated until June 2020.
This ruling emphasizes the complexities of California’s vacation pay laws, wherein vacation time is considered as “earned wages” that employees accrue over the course of their employment. While some states allow companies to implement a “use-it-or-lose-it” policy, California law prohibits such policies, which adds another layer of complexity for employers to navigate.
Given these multifaceted aspects, employers should be wary of potential legal challenges related to vacation pay. Drafting employee contracts and policies that are in compliance with both state and federal laws is of utmost importance. Legal counsel should be consulted during the development and review of these documents to stave off potential lawsuits and ensure best practices are being implemented.
Failing to correctly administer vacation pay can result in class action claims and penalties under California’s Private Attorney General Act, providing yet another reason why employers must grasp these convoluted laws and make informed decisions on how to best manage their employees’ vacation time.
The impact of this recent Ninth Circuit ruling serves as a sharp reminder to companies of the criticality of understanding and correctly applying the law. As we navigate the ever-changing tides of this pandemic, it is more important than ever for companies to place employee welfare, and adherence to employment law, at the forefront of their business practices.