Earned Vacation at Kelly’s
Services Illegally Denied
Millions claimed in Class Action
Kelly’s Services offers its employees (temps to its clients) forty hours of vacation for 1,500 hours of service in on calendar year, provided the employee received paychecks for January through December. To be eligible for vacation, an employee must be an “active employee” as of December 31, i.e., and must receive a paycheck dated December.
If the employee meets these criteria, a check for vacation pay is automatically issued the following January. But if the employee is gone before December, no check is given.
A case brought in state court by two former employees (and those similarly situated) under the Illinois Wage Payment & Collection Act (“WPCA”) wound up in federal court, where Kelly’s moved to dismiss. Jude Leinenweber denied this motion, finding that Kelly’s vacation benefit was a “length-of-service plan,” and that employees leaving prior to December could not lose their earned vacation.
Kelly’s argued that its plan served as an inducement for future services – not compensation for past services.
Judge Leinenweber cited the Golden Bear rile that employees under a plan such as Kelly’s employees earn vacation pro rata as service is rendered. Under this rule, a forfeiture because an employee was not employed on a specific date violates the WPCA.
A plan needn’t use terms like “earned” or “accrued”; employees earn vacation benefits based on past service. Confusion in this branch of employment law may be, in part, the result of Prettyman v. Commonwealth Edison (1995), where employees (like those in the Kelly’s case) were granted their entire vacation benefit on January 1.
But the Prettyman employees had been paid for the unused vacation earned in the year they separated (even though they left in September, rather than December).
Is your vacation pay plan a “length-of-service” plan? If so, you must take care to impose no forfeitures for pre-January 1 departures. We can help.