With each new year, many employers resolve to review their employee handbooks.  For 2014, employers should add paid time off policies to their lists of handbook policies in need of review – particularly in light of a recent decision by the Louisiana First Circuit Court of Appeal, Davis v. St. Francisville Country Manor, L.L.C., —So.3d—, 2013 WL 5872030 (La. App. 1 Cir. 11/1/13).

In Davis, a former employee sued her former employer seeking compensation for her unused “paid days off.”  The employer claimed it did not need to compensate her for the paid days off because it was a “mere gratuity” and not “vacation.”   The court considered whether the former employee’s accumulated paid days off constituted earned, payable “wages” within the meaning of the Louisiana Wage Payment Act, or whether the paid days off were in the nature of a “mere gratuity.”

The Louisiana Wage Payment Act, La. R.S. 23:631, et seq., requires the prompt payment of “the amount then due under the terms of employment” (earned “wages”) upon an employee’s discharge or resignation.   Failure to pay “the amount then due under the terms of employment” within the statutory period can result in penalties and attorney’s fees being assessed against the employer.  The statute also specifically addresses vacation pay and the requirement to timely pay a departing employee her accrued but unused vacation.  Vacation pay is considered an amount due only if the employee is eligible and has not otherwise been compensated for that time.

The Davis court found the difference between paid vacation time and paid days off to be “a matter of semantics” and ruled in the employee’s favor.  Employers should review their existing paid time off policies and understand their obligations under the Louisiana Wage Payment Act in light of this ruling.