One of the most common employment related questions asked is whether an employer must pay its employees for accrued, unused paid time off (“PTO”) or vacation time in New York State, regardless of whether the employee resigns, provides notice, or is terminated.

The short answer is…it depends on the employer’s written policy or pattern of practice.

The average employee is not aware that New York Labor Law § 195.5 requires an employer “to notify his or her employees in writing or by publicly posting the employer’s policy on sick leave, vacation, personal leave, holidays, and hours.” See, LS606 (ny.gov).

Generally, if a company in New York State agrees to provide its employees with PTO or vacation time, then the employees must be made aware of such benefits in writing.  Most companies provide an employee handbook policy regarding the issue of whether the employee is paid for accrued vacation time after they are terminated or quit.  If an employer chooses not to pay employees for earned PTO or vacation time upon termination, then the policy must state that.

  • If an employer puts such a policy in writing, and if the employees receive notice of this policy, then the New York State courts will generally enforce that policy.  

Employers should know that even if the company has a written policy regarding payment of vacation time upon termination, if the company has a pattern or practice of paying former employees accrued but unused vacation time or PTO after termination, then the employer should do so for everyone, or risk being held liable for failing to make the payments for a particular employee.

Employees should carefully review your employer’s vacation or PTO handbook policies to determine whether your employer must pay out any unused accrued vacation time after you leave or if you are terminated.   If your employer does not have a written policy, the oral policy (or past practice) may be enforced after an investigation by The Division of Labor Standards. Employers who violate New York Labor Law § 195.5 are subject to civil penalty.  See, Unpaid/Withheld Wages and Wage Supplements | Department of Labor (ny.gov)

To summarize…in New York State, if an employee has earned unused vacation time, and there is no written forfeit policy, then the employer should pay the employee for the earned unused vacation time upon resignation or termination.

This article is intended for general information and educational purposes only and should not be considered legal advice or counsel. The substance of this article is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. © 2021 Regina M. Sarkis, Esq.