Employment Law Daily IBM employee failed to show he was not paid vested vacation wages upon termination
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Friday, June 10, 2016

IBM employee failed to show he was not paid vested vacation wages upon termination

By Ronald Miller, J.D. Granting summary judgment against the claims of a former employee who alleged IBM failed to pay vacation wages and “personal choice holiday” wages upon termination, a federal district court in California found the employee failed to raise a disputed issue of fact material to his claim that he was not paid all vested vacation at his final rate of pay.  Rather, the undisputed evidence established that he was paid for 15 accrued vacation days, consistent with the terms of the applicable “IBM Vacation Plan” (Reznik v. International Business Machines Corp., June 7, 2016, Rogers, Y.). The employee brought a putative class action against IBM alleging that the employer failed to pay vacation wages and “personal choice holiday” (PCH) wages upon termination. He also alleged claims under the California Labor Code for failure to pay vested vacation wages, inaccurate wage statements, and waiting time penalties, as well as a claim for unfair competition under California Business and Professions Code section 17200. IBM filed a motion for summary judgment on all claims. Vacation plan. The employee was hired on December 3, 2012. In April 2014, he went out on long-term disability. IBM contended that its “IBM Vacation Plan – California Supplement” applied to the employee. Under the California Plan, IBM employees earn and accrue vacation daily on a pro rata basis throughout the calendar year. Employees with less than 10 years of service may accrue up to 15 days of vacation per year. The Plan also required worksites to offer 12 holidays, up to six of which may be PCH days. Like vacation days, PCH days carry over from year to year, subject to a cap on accrual. “Plan coverage begins on employee date of hire and ends on date of separation.” Moreover, long-term disability, separation, and retirement are all types of “separations” that trigger the payment of vacation as wages. Upon separation, under the California Plan, the employee is paid for all unused vacation and PCH days, including days that carried over from prior years, subject to the accrual limitations. Accrued days. When the employee went on long-term disability, he had less than 10 years of service at IBM and therefore, under the California Plan, he was eligible to accrue up to 15 unused days of vacation and to accrue up to six unused PCH days. Prior to going on long-term disability, the employee had not used any of his vacation days or personal choice holidays. He received $12,502.75, which represented 25 days’ pay at his usual rate. IBM contended their calculations at the employee’s separation not only paid him for all accrued vacation and PCH days, but actually overpaid him by four days. “Use it or lose it” policy. The employee brought claims under California Labor Code Section 227.3, which provides that an employer policy shall not provide for a forfeiture of vested vacation time upon termination. In this instance, he claimed that IBM’s vacation policy was an unlawful “use it or lose it” policy; and that the PCH days were vested vacation time. Under Sec. 227.3, an employer is “not permitted to adopt a ‘use it or lose it’ policy under which employees’ already vested vacation time” is confiscated if unused within a specific time period. California courts have distinguished between policies that take away vested vacation time and those that put limits on the accrual of future vacation time. The employee contended that although the California Plan did not say that employees will lose accrued vacation days, IBM’s true policy was different. He pointed to a PowerPoint presentation during his orientation that stated “[u]nused days cannot be carried over into the next year or cashed out.” IBM countered that the PowerPoint presentation was only a summary of IBM’s benefit plans, and that employees were directed to an intranet site to get the full description of the applicable plan. Here, the court concluded that the employee’s argument that the PowerPoint was IBM’s actual policy was not supported by evidence. IBM’s Plan Administrator confirmed that the California Plan was the operative plan throughout the entire applicable period and was not amended during that time from the Plan Administrator. Moreover, the undisputed evidence was that the employee was paid for 15 accrued vacation days, consistent with the terms of the California Plan. “Personal choice holiday.” The employee also argued that PCH days were actually vacation days, and required to be treated that way for purposes of paying out earned, unused days. The Labor Code draws a distinction between vacation and other forms of paid leave based upon the true purpose of the program. If the time was actually intended to be used as vacation, Section 227.3 applied, but if the time served some other function, the statute did not apply. IBM disputed the employee’s claim that PCH days are actually additional vacation days. It asserted that PCH days are intended to provide employees the opportunity to observe holidays and other meaningful dates that may not be observed generally at the employee’s worksite. Like vacation days under the California Plan, PCH days carried over to the following year, but offset the number of new PCH days the employee could accrue. In fact, the employee was paid for all six unused PCH days he accrued. Because he was paid for his accrued PCH days just as if they were vacation days, he had no basis for a claim that he was owed anything under the statute on this theory. As he offered no evidence to show he was not paid for all his vested vacation and PCH days upon separation, there were no triable issues of fact as to his Section 227.3 claim.

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