With the holiday season upon us, employers and HR leaders need to recognize the following when it comes to recovering vacation that has been advanced to an employee: The U.S. Department of Labor Wage and Hour Division’s position is that advanced vacation pay may not be deducted from the guaranteed salary of exempt employees.
The department regards advance vacation pay as inconsistent with deductions allowed under the definition of “salary basis” for exempt employees. A fuller explanation appears in the DOL Fact Sheet on Salary Basis.
While the N.C. Department of Labor makes no such claim, the fact is that whenever state laws differ from the federal Fair Labor Standards Act or FLSA, an employer must comply with the standard most protective to employees. Thus, the “no deduction for advanced vacation pay” rules apply here.
With that in mind, it is recommended that you do not allow advanced vacation to exempt employees if you want to recover the costs associated with this practice. Remember, ambiguous policies and practices regarding vacation pay have been construed against employers and in favor of employees.
For information on how to create an effective vacation pay policy or to discuss related issues to this item, please call a member of CAI’s Advice and Counsel team at (919) 878-9222 or (336) 668-7746.