Many employers offer paid time off [PTO] as a benefit of employment. These benefits come in various forms, such as, weeks of vacation per year of service or earned or accrued PTO based on hours of work during a set period of time. When we quit or are terminated, we are generally not entitled to PTO as a payout when we leave the company. In other words, there is no Minnesota law requiring an employer to pay out PTO time when we leave employment.
However, sometimes employers have a provision in their employee handbook stating circumstances in which they will pay out PTO to employees upon separation from employment. Most employers honor these handbook provisions without issue. But what if they don’t? Do these PTO provisions create a legal right to the PTO following separation such that an employee may recover the value of the PTO from an employer who refuses to pay it? Put another way, can an employee handbook create a contract right to PTO? The Minnesota Supreme Court recently answered, yes, it can.
In Hall v. City of Plainview, Plaintiff Donald Hall had accumulated over 1,700 hours of unused PTO at the time of his termination from the City of Plainview. A provision in the employee handbook stated, in relevant part, that “[w]hen an employee ends their employment with the City, for any reason, 100% of the accrued unused personal leave time will be paid up to 500 hours, unless the employee did not give sufficient notice as required by the policy.”
However, a disclaimer in the handbook also stated that the handbook “is not intended to create an express or implied contract of employment between the City of Plainview and an employee.” This provision further states that while the handbook “contained language dealing with the grievance procedure, discipline or termination, which the City may cho[o]se to follow…[t]hese provisions however, are not intended to alter the relationship between the City as an employer, and an individual employee, as being one which is ‘at will’, terminable by either at any time for any reason.” The question here was whether this disclaimer language unambiguously precluded Hall from arguing a unilateral employment contract obligating the employer to pay the accrued PTO. The Court held it did not.
Here, the Court concluded that the handbook language in this case contained “sufficiently definite terms regarding the City’s PTO program” as to create an enforceable unilateral employment contract between an employee and employer that required the employer to pay accrued paid time off (PTO) after an employee ends employment. While this does not mean that every employee handbook containing a PTO payout provision creates a contractual right to PTO, it does suggest a careful review of the handbook language is warranted. If you have a question about whether you may be entitled to PTO benefits upon separation, contact one of our employment law attorneys to discuss your rights.
Firm partner Frances Baillon helped co-author the amicus brief in support of the plaintiff with attorneys Nick May, Phil Kitzer and Brian Rochel on behalf of the Minnesota Chapter of the National Employment Lawyers Association.
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