Unlimited Vacation Policies: Employers Must Seek to Avoid Risks

What is Unlimited Vacation Time?

Labor shortages throughout the U.S. have employers scrambling to attract new talent. In addition to paying higher salaries, employers are also responding by offering more attractive work environments, better working conditions, and innovative benefits. A particularly appealing benefit to many job seekers is one that allows employees to take an unlimited amount of vacation time. When employers provide an unlimited vacation policy, this benefit allows workers to take as much time off as they wish as long as their time away does not interfere with their ability to complete their work. Employers must consider certain factors, however, when they are developing an unlimited vacation policy.

What is Vacation Time vs. PTO?

While vacation time is paid time off to be used for vacation, PTO, or paid time off is an inclusive term that includes time off for vacation time, sick days, holidays, and personal days. While some companies treat each of these elements as separate categories, PTO combines them into one category and allows employees to allocate their designated time off in a manner of their choosing. When companies offer an “unlimited vacation policy”, however, they should avoid risks by clearly stating that unlimited time off is to be used strictly for vacation.

Developing Your Organization’s Unlimited Vacation Time Policy

There are a number of important issues that employers must consider before they establish an unlimited vacation policy versus a PTO policy. Company policies should, for example, include restrictions to protect themselves from having to pay for an employee’s lengthy absence due to family or medical reasons. To avoid these kinds of situations, there are specific provisions employers can include in their unlimited vacation policy:

· Employers should identify their unlimited time off policy as an “Unlimited Vacation Policy” to clearly establish that unlimited paid time off is only for vacation.

· When drafting an unlimited vacation policy, employers should limit the number of consecutive days an employee can be away from work.

· Unlimited vacation time is a benefit offered to employees with exempt status only.

· All requests for vacation time are subject to prior approval by management, and the company reserves the right to deny vacation time based on organizational priorities and project deadlines.

· A leave of absence required by the Family and Medical Leave Act (FMLA) should not be a part of the company’s unlimited vacation policy.

· A leave of absence allowed under the Americans with Disabilities Act (ADA) should not be a part of the company’s unlimited vacation policy.

· Employers should inform employees that they are responsible for completing their tasks and meeting applicable deadlines.

· Employees are also responsible for following all established procedures for taking time off.

Payment for Unused Vacation Time at Separation.

An organization’s unlimited vacation policy should also state that unlimited paid time off does not accrue and that any unused paid time off is not paid out at termination. Employers should consult with a labor and employment attorney to determine whether there are applicable laws regarding payment of unused paid time off at the end of an employee’s tenure with the company. Legal counsel can also advise employers about the specific local or state policies that may apply.

The Benefits of an Unlimited Vacation Policy

Some employers have found that when employees are offered an unlimited amount of vacation time, they are often more committed to their jobs and the organization because they feel the company supports their need to establish a work/ life balance. Unlimited vacation time is especially appealing when employees know that that time off is available not only when they want to take a vacation, but also when they need some time off for self-care, or to fulfill personal obligations. While an unlimited vacation policy may be an enticing perk for attracting qualified professionals, it also helps to retain employees who appreciate the option of having a flexible out-of-office schedule that allows them to keep their lives functioning smoothly.

What is an Exempt V. a Nonexempt Employee?

When a company offers unlimited vacation time, it is usually a benefit offered only to exempt employees. An exempt employee vs. a nonexempt employee is a comparison between two types of employee classifications related to overtime pay. Exempt employees are generally paid a salary and are not entitled to overtime pay, and nonexempt employees are paid by the hour and are entitled to be paid overtime wages. The Fair Labor Standards Act (FLSA) establishes the criteria for whether employees are exempt or nonexempt.

Protect Your Organization by Establishing Company Policies

Unlimited vacation policies are becoming more and more popular in the workplace, but when employers are designing their individualized plans, they must also consider:

Family and medical leave laws,
Paid sick time requirements,
Leaves of absence that are a reasonable accommodation under the rules of the ADA,
State laws regarding a company’s obligation to pay workers for unused vacation at the time of separation.

These policies must be carefully outlined or employers may discover they are obligated to pay the employee an amount for vacation time that is significantly more than the employer anticipated. Employers should consider consulting with a labor and employment lawyer before offering an unlimited vacation policy and adding the details of this benefit to your employee handbook.

Include Your Unlimited Vacation Policy in Your Company’s Employee Handbook

All companies, regardless of size, should protect their interests by including all their policies and procedures in their employee handbook. In addition to clearly defining the organization’s unlimited vacation policies, the information contained in this constantly evolving document represents your company’s mission, culture, and codes of conduct. While Texas employers are legally obligated to comply with state and federal laws, the policies they outline in their employee handbooks inform all staff members of their legal rights and obligations. Employers, along with corporate counsel, those in the human resources department, and the management teams, should review the employee manual annually for accuracy and any verbiage that could give rise to legal claims.

The Benefits of Including All Company Policies in Your Employee Handbook:

· It introduces employees to company values, culture, and mission.

· It defines the employer’s expectations.

· It lets your employees know what they can expect from the company.

· It communicates all company policies and procedures.

· It outlines all company benefits.

· It can help to create a positive and supportive culture.

· It ensures the organization’s compliance with state and federal laws.

· If issues arise, it can help employers defend themselves against employee claims in a court of law.

Federal Employment Policies to Address in Your Company Handbook

The United States Department of Labor (DOL) oversees, administers, and enforces more than 180 federal laws. These laws govern the workplace activities for about 10 million workplaces and 150 million workers. The DOL policies cover:

· Critical worker rights,

· Anti-discrimination,

· Certain types of leave,

· Sexual harassment policies.

Updating Your Company’s Employee Manual

Companies should update the employee handbook whenever there is a change to the law. Some of the federal labor laws companies should address in their company handbook include the following:

Equal Employment and Anti-Discrimination Policy
Family Medical Leave Act (FMLA) Policy (50 Employees)
Jury Duty Leave
Military Service Leave
Sexual Harassment Policy

Creating an Employee Handbook If You Do Not Have One

· Employee Handbooks Can Protect Your Organization:

Businesses of all sizes can benefit from providing employees with a company handbook and uploading the document on their intranet site. This document is an essential tool for defining company policies and procedures and outlining the employment laws that apply to your team members.

· Employees Should Sign the Acknowledgment Form:

Employers should also include an acknowledgment form at the end of every employee handbook. The signed document will confirm that your employees have received, read, and understand the content contained in your company handbook. In case of an employment conflict, your employee handbook can also provide documentation of the organization’s compliance. Obtaining your employee’s signature on the acknowledgment form can also be of help in the event an employer must defend themselves against specific claims.

· Treaty Oak Can Draft a Document for You

If you need assistance creating an employee handbook for your organization, Natalie Lynch and her team at Treaty Oak have the skill and experience to help you build a document that will ensure you comply with all local, state, and federal laws.

Schedule a Free Consultation with Treaty Oak Now

Legal matters regarding labor and employment issues arise in all types of businesses. In addition to representing individuals and businesses in various labor and employment disputes and providing harassment prevention training modules and leadership development tools, our attorneys at Treaty Oak can also assist you with the following:

· Development of an Unlimited Vacation Policy

· Development of training manuals,

· Employment contracts,

· Employee handbooks,

· Performance evaluation materials,

· Drafting legal agreements to address non-disclosure, non-competition, severance, and separation issues.

Treaty Oak’s Clients Include:

Individuals
Corporations
Limited partnerships
Limited Liability Companies
Sole proprietorships
Family businesses
Investors
Beneficiaries
Vendors
Suppliers
Consultants
Professionals
Government Entities

About Natalie Lynch: Founding Attorney

Natalie R. Lynch, a business and employment law attorney in Austin, Texas, has demonstrated expertise in workplace investigations, employment law, and entity formations. Credentialed through the Association of Workplace Investigators (AWI), Natalie is the only consulting and credentialed expert in Central Texas who conducts investigations into allegations of harassment, discrimination, and hostile work environment. Having lived abroad in Ghana and Spain, Natalie brings unique perspectives to help organizations achieve business nationally and internationally. As a credentialed dispute resolution mediator, she routinely collaborates with general counsel, internal and external counsel, employment litigators, employment generalists, and senior human resources professionals.

Natalie is the outgoing Chair of the Austin Bar Association’s Labor and Employment Section. It serves in leadership roles for the Texas State Bar Association, including the International Bar Section and the Animal Law Section. In Colorado, Natalie was a two-term president of the Aurora Bar Association, the first recipient of the Colorado Bar Association’s Future Leaders award, and a member of the Bar Association’s Executive Council. With her extensive business background and solution-focused, purposeful, no-nonsense approach, Natalie excels at:

· Business formation

· Transactional matters

· Employment law

· Workplace discrimination matters

· Contracts

· Employment litigation avoidance

· Harassment Prevention Training Modules

As a credentialed AWI investigator, Natalie has extensive training in interviewing techniques and a unique and beneficial skill set in the legal field. Natalie insists that each investigation represents the standards of quality and litigation avoidance on which she built Treaty Oak. Before becoming a business owner, Natalie prepared by obtaining her undergraduate degree in international studies from Texas A&M University and her J.D. from South Texas College of Law. She also studied at the University of Denver. Natalie is licensed to practice law in Texas, Wyoming, and Colorado, and she holds certifications from Women-Owned Business (WBE), Minority-Owned Business (MBE), and Historically Under-Utilized Business (HUB).

Another one of Natalie’s passions is animal rights. She vehemently believes that animals of all shapes and sizes should be treated respectfully. To further her resolve, she generously contributes her time and resources to improving the welfare of animals with the Texas Humane Legislative Network. She also enjoys rallying behind her son’s many athletic endeavors, interacting with her two very large ad rambunctious dogs, and tending the garden she keeps behind her home.

Schedule a Free Consultation with Treaty Oak Now

If you are an employer seeking to resolve a labor and employment issue, protect yourself, your employees, and your business by contacting us at Treaty Oak. Our lawyers can help you navigate the complexities of your legal matter from inception to resolution. Our attorneys can also assist you in developing:

· Unlimited vacation policies

· Employment contracts

· Employee handbooks

· Performance evaluation materials

· Drafting legal agreements

· Workplace Investigations

· Harassment Prevention Training Modules

If you have questions, contact us for help now. Please email us or call 512 298 2346.

Unlimited Vacation Policies: Employers Must Seek to Avoid Risks