Employer Can Giveth and Taketh Away

Posted by Sessions & Kimball |

by Patrick E. Turner

Employee Rights Attorney

Mission Viejo, California

Q: If a salaried employee with the same company for 18 years has earned three weeks of paid vacation, received for the past 8 to 10 years, can the employer suddenly cut a week of this paid vacation?

A: “In California, vacation is considered to be deferred compensation in most circumstances,” says employee rights attorney Patrick E. Turner, Don D. Sessions Law Corp., Mission Viejo. “‘Use it or lost it’ vacation policies are generally disapproved; once vacation is earned by an employee, it cannot be forfeited.

“According to the fundamental tenets of fairness, employers are prohibited from retroactively reducing employees’ benefits or pay but can change the terms and conditions of employment in the future. Raising an employee’s salary is common practice, but no laws prohibit an employer form reducing it.

“The courts consider an employer’s proposed salary or benefits reduction as a ‘new offer’ of employment an employee is free to accept or reject. Consistent with California’s statutory ‘at will’ practices, an employee is also free to leave.

“In practical terms, employees can become accustomed to the long standing policies of their employers to provide certain benefits, so courts have concluded that policies of employers can only be changed with ‘reasonable notice.’ However, the courts have yet to provide a bright line rule as to what ‘reasonable notice’ is required of an employer to change a long held policy or practice.

“It’s important to note that salary and benefits negotiated as part of an express employment relationship may be locked in for a period of time pursuant to the contract. Failing to abide by the contract terms, an employer may be liable for breach of contract.”