In 2006, Lisa Owen, a former sales associate sued Macy’s, alleging that the store did not pay her all of the accrued, vested vacation pay to which she claimed that she was entitled. (Ms. Owen had previously worked for Robinson’s-May, which was acquired by Macy’s.) The Robinson’s employee handbook stated that “all eligible sales associates earn and vest in paid vacation after they have completed six months of continuous employment.” In other words, Robinsons made new employees wait six months before they began to earn any vacation. Ms. Owen asserted that this delayed vacation accrual policy somehow violated California’s Labor Code. Both the trial court and the court of Appeal disagreed, with judgment for Macy’s affirmed on appeal. Owen v. Macy’s, Inc. (filed June 29, 2009) B207719 (Los Angeles Sup. Ct. No. BC 355629).
The Appellate Court, Second Appellate District, made clear that the law permits an employer (1) to offer no vacation time whatsoever; (2), adopt a policy specifying the amount of vacation pay that an employee is entitled to be paid as wages; (3) that a company has complete discretion to determine the point at which vacation benefits begin to accrue; (4) and that employers may also warn employees, in advance, that employees will cease to accrue vacation time in excess of an announced limit (a no additional accrual policy). The Appellate Court stated that none of these policies violates California Labor § 227.3, in which vacation pay vests as its earned and cannot be taken away subsequently by an employer. Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774. This case highlight the employer’s legal right to determine the timing and extent of vacation benefits when choosing to provide vacation benefits to its employees. And, these are prudent, cost-containment features that should be incorporated into any vacation pay policy in California.