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The One Where There are 54 Weeks a Year

Alternatively: The One Where “Also” Means “In Addition To” In Any Event: Why So Surprised!?

The Indiana Court of Appeals recently awarded three former employees payment for their unused, accrued vacation time to the tune of nearly $70,000. Merry Christmas to them.

The decision in Commissioner of Labor on the Relation of Shofstall, Posey and Posey, v. Int’l Union of Painters and Allied Trades, AFL-CIO, CLC District Counsel 91 to award the former employees their vacation time seems simple enough. Indiana’s Wage Payment Statute (IC §22-2-5-1)  requires that employees, upon separation from employment, must be paid the wages due to them at their next and usual payday. The statute does not define “wages” but courts have regularly held that vacation pay constitutes deferred compensation in lieu of wages.  Thus, an employee is typically entitled to accrued vacation pay at the end of his or her employment UNLESS there is a clear policy to the contrary. This is not blog-worthy news. The news, as with most things, lies in the details.

Issue of First Impression: Union as Employer v. Union as Membership Organization

As noted in the Majority’s decision, it is “a well established rule that in Indiana courts exercise limited interference with the internal affairs and rules of a  voluntary membership organization.” But, there are exceptions to this rule and courts “are allowed to intrude in cases where the interpretation at issue is unreasonable, contrary to public policy, or in the presence of fraud…” Here, the plaintiffs were Union employees. That is, employees OF the Union. While, the Court declined to decide whether, in general, it could interfere with a union when it acts as an employer rather than a membership organization, it concluded that the non-payment of vacation time would be contrary to public policy and violate the Wage Payment Statute. As such, the Court found it appropriate to “intrude in the province of the Union and interpret its bylaws.” I, for one, am on the lookout for the case where the Court does hold that it can exercise the same level of “interference” with a union acting as an employer as it can with any other employer...

So This is How They Get it All Done?

In determining that the plaintiffs were entitled to payment for their unused, accrued vacation time, the Court set out to interpret at the Union’s bylaws. The section applicable to some employees read: “The salary…shall be…based on total package, plus $40 per day per diem (five days a week, 52 weeks a year), plus reasonable expenses. He or she shall also receive two weeks paid vacation per year.” (emphasis added). The Court neglected to note, but I find interesting, that at least some employees of the Union enjoy 54 weeks per year, rather than the 52 allotted the rest of us… Anyways. The bylaws section applicable to some other employees did not specify how many weeks of pay the employee was entitled to, but it also included “two weeks paid vacation per year.” Most notably, to the Court, no section contained any language that suggested forfeiture of vacation time at termination or prevented employees from carrying over accrued vacation time to the following calendar year. As such, under Indiana law, the employees were entitled to their earned but unused vacation time AND, because there was no policy (or even practice) of “use it or lose it” they would be entitled to compensation for unused vacation days from previous years. Cha ching.

Lesson Learned

While the Union obviously argued for a different outcome than the one decided by the Court, certainly it could not really be surprised, right? I mean, could it be surprised that it was treated the same as any other employer under Indiana law in a lawsuit that specifically involved individuals who were on its payroll and who performed work as employees, not as members or employees of another entity? Could it be surprised that its bylaws, which contained no forfeiture language whatsoever, coupled with its consistent practice of paying terminated employees for unused vacation time and allowing employees to carry-over time from year to year, were interpreted as not being quite clear enough to obviate the Indiana Wage Payment Statute? Even if the Union in this case was surprised, employers (unions now expressly included) should not be. The rule in Indiana is clear. Vacation pay is wages. And wages cannot be forfeited upon termination or the end of a calendar year, unless an agreement or published policy exists to the contrary. Get it? Got it? Good. Now where are my two extra weeks a year? I’d like to add them to June, please.



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