by Rob Ratton
At first blush, the idea of unlimited paid vacation sounds like an absurd perk offered only by tech startups full of capital and low on business acumen. Most employers spend considerable time and money guarding their vacation time, making sure that employees do not while away company resources pursuing a life of leisure.
However, over the past few years, unlimited vacation pay has begun to migrate into the stalwarts of traditional American business. For example, a Fortune 500 company recently made this option available to approximately 30,000 members of its senior management. Surprisingly, this new benefit did not result in a mass exodus to island getaways. In contrast, those companies that have implemented this plan have not seen a great uptick in the amount of vacation days taken.
The Right Culture
Under the right circumstances, an unlimited vacation policy is a cooperative display of trust between employer and employee. Ideally, allowing employees to take paid time when necessary shows a great deal of faith in your employees’ judgment and dedication. In the wrong circumstance, the offer of unlimited vacation can be perceived as a threat comparable to a parent telling a child that they are free to eat candy before dinner. Without a sense of trust, unlimited vacation might be perceived as a revocation of all vacation time.
Another issue is logistics. In a project-oriented business, employers are less concerned about when their employees are present as long as the job is done. However, this policy does not carry over well if you provide security guard services or are in retail. In some businesses, you need boots on the ground and you need a reasonable assurance of when they will be there.
Potential Legal Issues
Even the most noble of aspirations can create serious legal issues. A poorly conceived unlimited vacation policy can effectively eviscerate unpaid leave. Most companies allow an employee out on FMLA leave to use vacation time to supplement income. However, if you have unlimited vacation, you have converted three months of unpaid protected leave into three months of protected paid leave.
The problem grows even more complicated when one looks at potential discrimination issues. A number of companies have applied this leave to only a specific class of workers. If your company has significant disparities between different job classes along the lines of race, gender, or national origin, your policy could be seen as discriminatory. Furthermore, a company can deny a reasonable accommodation under the ADA only when there is an undue hardship. Employees denied temporary leave for a disability could point to an unlimited vacation policy as an indication of disability discrimination.
Statistics are clear: The average American worker is putting in more hours at the office and fewer hours on vacation. It is also clear that these longer hours come at a cost to productivity. Furthermore, traditional vacation policies are both expensive and time-consuming to maintain. Well-drafted unlimited vacation policies in the right corporate culture have been successful. However, the devil is always in the details, and any attempts to make this sort of transition must be carefully thought out.
Rob Ratton is an attorney with the law offices of Fisher & Phillips.
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