CALIFORNIA: Partially earned sabbatical may be due in final paycheck
A jury should decide whether an employer’s sabbatical program was actually vacation in disguise, ruled a California court of appeal. If so, then the sabbatical would be considered part of wages under California law. This means it is earned day by day, and must be paid out pro rata with a final paycheck if the employee ends employment before working long enough to be eligible to take the sabbatical. If not, then the partially earned sabbatical has no value upon termination.
Since 1987, the state Department of Labor Standards Enforcement (DLSE) has followed a four-part test to determine whether a sabbatical program in private industry is a true sabbatical and not equivalent to vacation (wages). The court considered the DLSE’s opinion, but came up with its own test. First, the sabbatical must be granted infrequently (typically seven years or longer). Second, the length of leave should be longer than the normal vacation period, in order to do more than just provide rest, as a vacation does. Third, the sabbatical must be in addition to regular vacation, which should be comparable to the average vacation benefit in the relevant labor market. Fourth, the program should incorporate some feature to show that the employee is expected to return to work after the sabbatical ends. The real question, said the court, is whether the time off is intended to retain the most experienced employees and enhance their value to the company when they return (a true sabbatical) or to compensate employees for their work performed (vacation) (Paton v. Advanced Micro Devices, Inc., Cal App, Aug 2011).
Tips: If you offer a sabbatical program to your employees, and you’re not currently paying out a pro rata share of the sabbatical upon termination, review your program to determine whether adjustments need to be made. Contact your Vigilant staff representative for assistance. For more information on final paycheck obligations, see our Legal Guide, “Final Paychecks” (1648).