Employer cannot forfeit wages that employees already earned

BETWEEN 2005 and 2013, Sheri Garibaldi worked as a part-time teller for Bank of America (BOA), in its branches in Belmont and Foster, California. Garibaldi was classified as a “20 hour” part-time employee, although she was regularly scheduled to work more than 20 hours per week. As part of her wages, Garibaldi received paid time off. The amount of vacation employees could earn was accrued based upon their hours.
BOA also provided a system of “floating holidays” where employees accrued additional paid time off if a bank holiday fell on a day an employee was not scheduled to work. Garibaldi believed that these “floating holidays” were the equivalent of additional vacation days. However, if “floating holidays” were not used in the year they were earned, the “floating holidays” were lost. Additionally, BOA provided employees with ten “occasional illness” days per year, two of which could be used for a purpose other than illness. If an employee’s “occasional illness” days were not used, they were lost at the end of the year.
BOA also paid its employees in outstanding recognition points, which they can use only to purchase items through BOA’s online store.
When Garibaldi left BOA, she lost her unused floating holidays, all of her occasional illness hours, and her outstanding recognition points.  Garibaldi then sued BOA to, among other things, recover payment for her unused vacation and floating holiday pay. She also alleged that the recognition points were an illegal form of payment and being able to use the points only at BOA’s online store was a form of unlawful coercion.
In California, wages earned by an employee must be paid precisely in accordance with the Labor Code provisions. Although the term “wages” is often understood as money paid for hours worked, ‘wages’ could also mean commissions, pension, profit-sharing plans, and bonuses.  Earned vacation pay is considered wages and is, therefore, governed by the wage laws.
Some employers combine their vacation, sick, and/or holiday policies into a single benefit program that is sometimes called a “paid leave” or “paid time off” program.  When these policies replace vacation and sick leave policies and provide employees a certain number of paid days off that can be used for any purpose including vacation, then these programs may be subject to the same rules governing vacation policies. The Labor Commissioner also takes the stand that “personal holiday” and “floating holiday” policies that allow employees an absolute right to take paid days off for whatever purpose they wish are subject to the same rules that govern vacation policies. These rules include the following:
Vacation time vests when labor is performed. (Vesting means that vacation time is earned and the employee is invested or endowed with rights in the wages). For example, if an employee is entitled to two weeks (10 work days) of vacation per year, after six months of work he or she will have earned five days of vacation.
Since vacation pay is another form of wages which vests as it is earned, the forfeiture of vacation pay that is not used by a specified date (“use it or lose it”) is an illegal policy.
Generally, whenever the employment relationship ends, and the employee has not used all earned and accrued vacation, the employer must pay the employee at his or her final rate of pay for all earned and accrued and unused vacation days. Such pay must be included in the employee’s final paycheck.
Rather than proceed to trial, the parties in the BOA case agreed to settle for $9 million.

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The Law Offices of C. Joe Sayas, Jr. welcomes inquiries about this topic. All inquiries are confidential and at no-cost.  Atty. Sayas’ Law Office is located at 500 N. Brand Blvd. Suite 980, Glendale, CA 91203. You can contact the office at (818) 291-0088 or visit  www.joesayaslaw.com. 

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C. Joe Sayas, Jr., Esq. is trial attorney who has obtained several million dollar recoveries for his clients against employers and insurance companies. He has been selected as a Super Lawyer by the Los Angeles Magazine, featured in the cover of Los Angeles Daily Journal’s Verdicts and Settlements, and is a member of the Million Dollar-Advocates Forum.