May an employer withhold payment for unused paid vacation days as part of a mass layoff or plant closing?

Author: Michael C. Jacobson, XpertHR Legal Editor

Probably not, depending on the terms and provisions of any written employment contracts and whether the employees have secured their rights to the vacation days by the terms of their employment. If your company has a written policy, for example, that compensates any discharged employees for unused vacation days depending on tenure, the company must still abide by its policy at the time of a mass layoff or plant closing. To violate the policy would be to breach an implied or written contract with the employees in question, and would expose the company to liability following the mass layoff or plant closing. The Employee Retirement and Income Security Act (ERISA) may also apply to this situation, so employers are best advised to educate their supervisors regarding the terms of ERISA and ensure that it complies with both ERISA and WARN when the situation requires it.