Electronic Data Systems Corp. v. Attorney General, 440 Mass. 1020, 798 N.E.2d 273 (2003).

This case raises the issue whether the Massachusetts Payment of Wages Act, G.L. c. 149, §148 (“Wage Act”), requires an employer to pay employees for unused vacation time upon termination, even when the employer’s written vacation policy expressly disclaims any such payments.  The Superior Court held that the employee’s unused vacation time constitutes “wages” earned under the Wage Act, notwithstanding the employer’s published policy to the contrary.  In its amicus brief representing the Associated Industries of Massachusetts and the Retailers Association of Massachusetts, NELF argues that the lower court decision is inconsistent with the plain language of the Wage Act, which posits the employment agreement as the controlling authority on the subject of vacation benefits.  The Wage Act merely enforces an employer’s contractual obligation to pay an employee’s regular compensation during an authorized vacation leave.  Requiring an employer to pay for unused vacation time when the employment agreement disavows any such payments would violate the Wage Act and impose an unpredictable financial burden on the employer that would be contrary to the bargain between the parties.  Moreover, courts from many other jurisdictions applying similar state wage laws have reached the same conclusion:  a terminated employee has no right to receive payment for unused vacation unless the employment agreement so provides.  NELF also argues that there are compelling policy reasons to allow an employer to treat unused vacation time differently from used vacation time.  A paid vacation allows the employee to rest and recuperate and provides the employer with the benefit of a rested employee.  Requiring the employer to buy back unused vacation time serves no such mutually beneficial purposes, because the employer receives no consideration for financing a former employee’s free time.  An employer is also better able to manage the predictable cost of employees’ scheduled vacations than the unpredictable cost of paying employees for unused vacation time.  Oral argument is scheduled before the Supreme Judicial Court in October, 2003.