© 2025 Seyfarth Shaw LLP Massachusetts Wage & Hour Peculiarities, 2025 ed. | 5 with deference and some of its provisions have been given effect by the Massachusetts Supreme Judicial Court (SJC).17 The advisory asserts that withholding vacation payments constitutes withholding wages and violates the Wage Act because an employee may not forfeit earned wages, including vacation payments, by agreement.18 Similarly, if an employer terminates an employee, whether or not for cause, or if an employee resigns his or her employment voluntarily, the employer must pay the employee all wages earned through the termination date, including any earned and unused vacation time.19 Employers and employees cannot contract around the requirement that an employee must be compensated for earned vacation upon termination.20 However, an employer may establish as part of the terms of employment “the amount of paid vacation the employee will receive and/or a specific time of the year when the employee can take a vacation, depending on the needs or demands of the business.”21 The employer may also establish procedures for scheduling vacations.22 Employers will benefit from drafting unambiguous vacation pay policies because Massachusetts courts have resolved ambiguities in favor of employees.23 a. Caps and “Use It or Lose It” Policies Employers may cap the amount of vacation time that employees can accrue or earn.24 For example, an employer may state in its policy that after accruing a total of four weeks of vacation, an employee will cease to earn additional vacation days until he or she has used some of the accumulated time.25 Thus, the employee would stop earning additional vacation time until the total accrued time drops below four weeks.26 In addition, the employer may enforce a “use it or lose it” policy that requires its employees to use all accumulated vacation time by a certain date or 17 EDSC II, 454 Mass. at 68-69. 18 Massachusetts Attorney General Advisory 99/1; EDSC II, 454 Mass. at 68. Examples of impermissible agreements include vacation policies that condition the payment of vacation time on continuous employment or that require employees to provide notice prior to quitting. EDSC II, 454 Mass. at 69 (“[I]f an employee is ‘discharged from . . . employment,’ the value of the vacation benefit earned up to that date and that would still be available if the employee remained at the job must be ‘paid in full on the day of his discharge.’”). 19 EDSC II, 454 Mass. at 69-71; Massachusetts Attorney General Advisory 99/1. Continued payment of salary or other benefits after termination does not alleviate this obligation. Dixon v. City of Malden, 464 Mass. 446, 451-52 (2013). 20 EDSC II, 454 Mass. at 70 (“[T]he Wage Act would have little value if employers could exempt themselves simply by drafting contracts that placed compensation outside its bounds—as [the employer] attempted to do, when it stated that ‘vacation time is not earned.’”). 21 Massachusetts Attorney General Advisory 99/1. 22 Id. 23 Elec. Data Sys. Corp. v. Attorney Gen., 440 Mass. 1020, 1020-21 (2003) (EDSC I) (holding that personnel policy which stipulated that “[i]f you leave the company, you do not receive vacation pay for unused vacation time” only applied to employees who voluntarily left the company because policy was ambiguous and ambiguity should be resolved in favor of employee). 24 Massachusetts Attorney General Advisory 99/1. 25 Id. 26 Id. Such caps must be applied prospectively.
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