Fringe benefits for employees may include forms of compensation such as vacation pay, sick leave, holiday pay, personal time off, bonuses, severance pay, and pensions. While there is no legal requirement that employers offer such benefits, once promised, they may not be arbitrarily withheld. Wage claims and other legal actions frequently arise because employers and employees understand benefits policies differently. In order to avoid such disputes, employers are advised to create clear and precise policies. Q. An employee I terminated claims I have to pay him for his accrued vacation time along with his final wages. Is that true?
A. The answer depends on your written policies, any agreements you have made with the employee, and your past practices with other departing workers. ORS 652.140 states that "all wages earned and unpaid" are due at termination, and this includes compensation for benefits earned under your policies. If your vacation policy is ambiguous, or if your past practice was to cash out leave accruals, you should include the vacation pay in your employee´s final paycheck. If an employee has a reasonable expectation of receiving unused vacation pay based on your representations and policies, a court would likely grant the employee´s claim for unpaid wages and penalties. Q. My vacation policy says only that vacation is earned "after one year." What if my employee quits or is fired before the year is up?
A. The answer again depends on your policies and practices. To avoid disputes and wage claims, adopt a vacation policy that specifically addresses the question of whether vacation pay will be prorated when an employee leaves in midyear. Your policy should also specify, for example, whether vacation earnings will accrue indefinitely from year to year, or whether there is a maximum cap on accruals. Q. My written policy states that an employee who has not used accrued vacation time is not entitled to it upon leaving employment. Despite that language, I opted to pay the last three departing employees their vacation time. Am I now legally obligated to cash out the accrued balances for other departing employees?
A. Probably. As an Oregon employer, you can legally adopt a "use it or lose it" policy for vacation time, under which departing employees are not entitled to pay for accrued leave balances. But if you routinely disregard such a policy and set a precedent of compensating employees for accrued vacation, a court may find that your practice overrides the written language in your policy. Q. Am I required to cash out accrued sick leave when my employee terminates?
A. Generally, sick leave is not regarded as a benefit that must be cashed out at termination. To avoid disputes in this area, clearly communicate your sick leave policy to employees. Q. Do I have to pay benefits while an employee is out on family leave?
A. Employees on family leave under the Oregon Family Leave Act (OFLA) and the federal Family and Medical Leave Act (FMLA) are entitled to use any accrued paid leave, including vacation leave, sick leave or paid time off during their qualifying absences. Sick leave may be used during OFLA or FMLA absences, even if the employee is not sick (i.e., to care for a family member with a serious health condition), even if the employer's policy ordinarily limits its use to when the employee is actually sick. If an employee is eligible to use both vacation and
sick leave during a family leave, you may choose (or specify in your policy) the order in which those accruals are to be used. You may also require that it be used during family leave, so that the employee taking 12 weeks (or more) of leave doesn't take additional paid leave on return. When an employee uses FMLA leave, you must also continue any group health plan coverage during the leave. During an OFLA-only leave, insurance coverage need not be continued, but all benefits must be reinstated at prior levels immediately upon the employee´s return. Q. Are there required holidays that I have to give my employees?
A. No. Private employers in Oregon are not obligated to provide employees any specific days off during the year for holidays. There is also no special rate of pay mandated when an employee works on a holiday. An employer could, for example, legally schedule employees to work on New Year´s Day or Christmas Day at their regular rate of pay. Employers who may need employees to work on holidays are advised to clearly communicate such expectations well in advance. Q. Although my policy indicates that Thanksgiving Day is one of our company´s paid holidays, I need two employees to work that day to meet production demands. Can I require them to work on Thanksgiving Day?
A. Yes. It is best to advise employees -- for example, in your job descriptions and in your personnel manual -- that they may be required to work on holidays. Oregon wage and hour laws do not require automatic "double-time" for hours worked on a holiday. But if your policy provides that Thanksgiving is a paid day off for all employees, yet you require certain individuals to work that day, you must equalize the situation for those workers. For instance, you might provide them a different paid day off. Or, you could pay the employees for actual hours worked on Thanksgiving in addition to their holiday pay. Employees who work on a holiday are not automatically entitled to overtime pay, but should, of course, be paid for overtime if they work more than 40 hours in the workweek. Q. What happens if one of our usual paid holidays, such as the 4th of July, falls on a weekend?
A. A thorough holiday policy will address this situation. Your policy may state that you won´t offer holiday pay at all for a weekend holiday, or it may state that you will give employees a paid day off on the Friday before or the Monday after. If your policy is ambiguous or silent on this point, an employee who files a wage claim and who can demonstrate a reasonable expectation of receiving pay for the holiday will likely prevail. Q. I paid my employee for 43 hours of wages during the last workweek. Eight of those hours were paid as sick leave, as the employee was out ill for one day. Am I required to pay the employee for three hours of overtime?
A. No. The required overtime pay is 1½ times the hourly rate for hours worked in excess of 40 in a workweek. Overtime is calculated based on hours actually worked, and your employee worked only 35 hours during the workweek. Unless an employment contract or collective bargaining agreement states otherwise, you needn´t count sick leave, vacation time, holidays, or other paid time during which the employee did not perform work. Q. My policy manual states that employees accrue one day of sick leave for each month worked. If I "advance" sick leave pay to an employee who hasn´t yet earned it, can I adjust against the employee´s future accruals?
A.Yes. Your written sick leave policy may provide for such advances and adjustments. Employees should be advised in advance of this type of policy. Q. Can I offer a personal time off (PTO) plan in lieu of separate sick leave and vacation accruals?
A. Yes. Some employers choose to offer a fixed number of floating days during the year, which employees are permitted to use for personal reasons, illness, vacation, or holidays. Q. Who is a part-time employee? Who is a full-time employee? And what minimum weekly hours must an employee work to become eligible for insurance benefits?
A. For purposes of employee benefits, there are no statutory definitions of "part-time" or "full-time," and minimum weekly hours for benefits eligibility are determined by an employer´s policy or by the terms of the group health coverage plan the employer adopts. Q. What is the waiting period for employee benefits? Is a "trial service" period mandatory?
A. There is no statutory "waiting period" or minimum length of service for benefits eligibility. This is determined by the employer´s policy. No "trial service" period is required, and an employer may choose to offer benefits immediately, when employees are hired. Q. Can I offer different benefits to different employees?
A. Yes, as long as the basis for benefit differences is not discriminatory. For instance, an employer can choose to offer different benefit packages to employees who perform different job duties, or can offer distinct benefits for employees based on the department or location in which they work. An employer may also offer greater benefits to management personnel than to regular employees. The benefits offered should not, however, be determined based on an employee´s age, race, sex, disability, or any other class protected under state or federal law. Q. Can I change the terms of my existing benefits policies?
A. Yes, if the changes are clearly communicated to employees, and if they are made prospectively, so that employees do not lose any benefits earned to date under the existing policies. Q. Do I have to pay my employee´s wages while she is out on jury duty?
A. In general, employers are not obligated to pay wages during jury duty service unless they have promised such wages as a fringe benefit. However, if your employee on jury duty is salaried and exempt, you must pay the full weekly salary if the employee performs any work during the workweek. While jury service is usually unpaid time off, you must allow an employee leave for jury duty, as it is against state law to terminate or discipline an employee for such an absence. If your policy is to pay an employee´s full wages during jury duty, you may require the employee to forfeit any jury service fees to your company. Q. Are there special provisions regarding benefits for employees on jury duty?
A. Yes. Effective January 1, 2012, Oregon employers of 10 or more employees cannot cease to provide health disability, life or other insurance during a period of jury service. HB 2828 (2011). Also, employers may not obligate employees responding to summons for jury service to use accrued vacation leave, sick leave or annual leave, and they must allow employees to take leave without pay. HB 3034 (2012). Q. Is an employee legally entitled to a certain amount of bereavement leave for a deceased relative?
A. No. Bereavement leave is not covered by or required under state or federal family leave laws. Like other benefits, bereavement leave is dependent on the employer´s policy. Q. If I have given out bonuses in the past, am I obligated to continue awarding them to workers?
A. The answer depends on the type of bonus at issue and whether it is "discretionary" or "nondiscretionary." If you award bonuses from time to time without regard to individual employee performance (e.g. a Christmas bonus for all employees), such bonuses are discretionary and need not be repeated in subsequent years. If you have promised or guaranteed specific bonuses to employees who reach given production or performance levels, these are nondiscretionary bonuses offered as part of the wage agreement. Nondiscretionary bonuses cannot be withheld arbitrarily. Your policy should clearly specify how and when such bonuses are earned, and whether an employee who terminates prior to the bonus award date will receive a prorated portion of the bonus.
Posted November 2012
Nothing on this website is intended as legal advice. Any responses to specific questions are based on the facts as we understand them, and not intended to apply to any other situations. This communication is not an agency order. If you need legal advice, please consult an attorney. We attempt to update the information on this website as soon as practicable following changes or developments in the laws and rules affecting Oregon employers, but we make no warranties or representations, express or implied, about whether the information provided is current. We urge you to check the applicable statutes and administrative rules yourself and to consult with legal counsel prior to taking action that may invoke employee rights or employer responsibilities or omitting to act when required by law to act.
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