Fired Employee Due Pay for Unused Vacation

October 20, 2006 ( - In overturning a lower court ruling, the Minnesota Court of Appeals found that a provision in an employer's employee handbook saying workers fired for misconduct would not be paid for unused vacation violated state law.

SHRM reports the opinion said, “[A] party cannot provide by contract what is prohibited by statute.” Minnesota law dictates employers pay discharged employees for unused vacation and does not make an exception for those fired for misconduct, according to the court.

A district court had determined that Sharon Lee was not due the unused vacation pay, citing a previous state appellate court decision that pay for unused vacation was not considered wages under the terms of an employment contract, according to SHRM. In Lee’s case the appellate court disagreed.

When Fresenius Medical Care bought Lee’s former employer, she received a copy of its employee handbook which stated an employee who gave proper notice before leaving Fresenius would be entitled to pay for unused vacation time. The handbook said employees fired for misconduct would not be eligible for unused vacation pay. Lee signed a form acknowledging receipt of the handbook.

When she was fired for misconduct Lee was paid wages earned, but not for unused vacation. She brought a claim in conciliation court and was awarded the vacation pay. Fresenius filed a claim in state district court and won judgment, at which time Lee appealed.

The case is Lee v. Fresenius Medical Care, Court of Appeals of Minnesota, No. A05-1887 (8/8/06).