Is a company obligated to pay out vacation time lost due to a use-it-or-lose-it vacation policy?
<p>Let's assume an employer has a use-it-or-lose-it vacation policy that allows employees to carry over 40 hours of vacation time from one year to the next. An employee ends the year with 60 hours of accrued vacation, and thus loses 20 of those hours. Given that <a href="https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXXI/Chapter149/Section148" rel="nofollow noreferrer">Massachusetts law considers vacation time wages</a>, and other circumstances require paying out those hours as if they were time worked (for example, on <a href="https://malegislature.gov/Laws/GeneralLaws/PartI/TitleVII/Chapter41/Section111E" rel="nofollow noreferrer">termination of employment</a>), is the company obligated to pay out the hours lost to the use-it-or-lose-it policy?</p>
<p>Assume the employee in question was not prevented from taking vacation; they could have, but chose not to.</p>
<p>(reposted here as requested from workplace.stackexchange)</p>

<p><a href="https://www.mass.gov/doc/attorney-generals-advisory-on-vacation-policies/download" rel="nofollow noreferrer">Here</a> is an extract about &quot;use-it-or-lose-it&quot; vacation policies from the Massachusetts Attorney General's Fair Labor division (Link goes to a Word document):</p>
<blockquote>
<p>An acceptable variation of an accrual cap is the vacation policy known
as “use it or lose it.” Under this policy, employees must use all of
their accumulated vacation time by a certain period of time or lose
all or part of it. Some policies allow the employees to “carry over” a
certain number of hours of vacation after the expiration of the
designated time period. The “use it or lose it” policy effectuates a
cap on accrual by limiting the total amount of vacation time that an
employee may accrue during the term of their employment. Under such
policies, the employer must provide adequate prior notice of the
policy to employees and must ensure that employees have a reasonable
opportunity to use the accumulated vacation time within the time
limits established by the employer. Otherwise, a cap on accrual or a
“use it or lose it” policy may result in an illegal forfeiture of
earned wages.</p>
</blockquote>
<p>Accrual cap is explained earlier in the document. To paraphrase, a company could set max accrual of vacation at 3 weeks. Once you accrue 3 weeks, you will not accrue any more until you use some of the time.</p>

united-states labor-law massachusetts