Articles & Updates

Employers Should Use Caution When Considering Unlimited Vacation Policies

Oct 27, 2015 | Articles & Updates

Article by Angela Cronk


LinkedIn recently announced that it is implementing an “unlimited vacation” policy, causing a flurry of media attention and leaving many employees in the U.S. daydreaming about long days on the beach away from work. In light of the high technology world we live in today, other companies, such as the Virgin Group, have implemented the same policy in response to the fact that most employees are “connected” to the office 24 hours a day, even on vacations with family and friends. While it might sound like a worthwhile benefit, employers must consider potential employment issues and solutions before deciding to adopt such a policy.

A close read of most of the “unlimited” vacation policies reveal that they are actually discretionary leave policies for “salaried” or “professional” workers.  The policies often require that employees meet with their supervisors to plan their time off.  The immediate concern is whether that type of potentially inconsistent approval from supervisor to supervisor will lead to claims of discrimination. Instead of one or two individuals in human resources receiving all the time off requests, the company will be responsible for decisions made by different supervisors who may be guided by different ideas or goals of productivity.

Keeping track of the time used by employees is also another significant issue for employers. An employer needs to know whether the time off is being used as a result of Family Medical Leave, as a result of a disability, as a result of an injury or just vacation time. An employee could easily take time off for “vacation” citing a need for a “mental health break” when the time may qualify as FMLA, under the Americans with Disability Act or workers’ compensation. Again, the key to preventing a potential problem is communication between the employer and employee.

Most employers require employees to work a certain amount of time before they can take vacation.  With unlimited vacation, the employer creates an implication that the employee does not need to earn the vacation. Establishing a time before the employee can qualify for the policy could help to prevent a new employee from creating problems with co-workers and supervisors. Furthermore, many employees “cash out” their vacation time when they leave a company. Vacation pay is governed by an agreement between an employer and the employee. Does an “unlimited vacation policy” create such an agreement? That is likely a question to be determined by the courts in the coming years.

Another possible area of concern for employers is determining if an employee has quit or resigned when the employee has permission to take discretionary leave.  Winning an argument that the employee voluntarily quit their position at an unemployment hearing would be difficult under those circumstances. An employee could easily argue that they were taking “time off” when they received a notice from their employer that they were no longer employed. This issue also relates back to the bigger concern about discrimination. The employee could argue that they were terminated for discriminatory reasons while on extended vacation.

A final issue of concern for an employer is that employees may try to use the policy as an excuse to only work the hours or days they want. For example, the employee may decide to take off every Friday as “discretionary” vacation. Employees need to understand that the policy is being adopted to permit them the ability to manage their time away from the office; it is not meant to take advantage of employers or co-workers.

Implementing any policy without standard requirements can lead to costly litigation for employers. Although this article touches on some potential problems and solutions, employers should consider how their policies affect all of their employees and proceed cautiously into the realm of unlimited time off.