As the dark days of winter hang on seemingly forever, bringing chilly winds and snowstorms to many parts of the U.S., taking some time off to escape to warmer climes is surely looking like a good option. But what if employees could take all of the time off they wanted to jet off to a tropical island or just hang out in their well-heated homes? Some companies, particularly in the tech sector, have policies that give employees unlimited vacation—a proposition that can be both a big draw and a potential danger.
Unlimited vacation sounds like a great way to boost employee morale—and it can be—but it’s not the right policy for every company and every employee, according to Jurate Schwartz of Proskauer Rose’s employment law counseling and training practice.
There are several benefits, both from the employer and employee perspective, to making vacation unlimited. Giving workers this kind of authority can engender the feeling that their employer respects their judgment. “Employees feel trusted, and that’s huge,” Schwartz told CorpCounsel.com. “Going to a workplace where you know that you are given this right to exercise your discretion in when and how much time you will take off—it’s a huge recruiting tool, it’s helpful to attract excellent talent,” she said.
An unlimited vacation policy, she added, can also be quite helpful in jurisdictions where employers are required to pay employees for their unused accrued vacation time after employment is terminated. With no set amount of vacation time, there will be no need to hand employees another check as they walk out the door.
Not many companies currently have these types of policies. Statistics from the Society for Human Resource Management (SHRM) show that in 2013 only 1 percent of U.S. companies offered workers unlimited vacation.
Schwartz said she believes unlimited vacation is only really suitable in “limited environments,” where work is project-based, employees are exempt under the Fair Labor Standards Act and workers have enough to do that they can’t achieve it all if they take too much time off. For example, the policy could work well for software engineers who could opt to take an unlimited vacation after they finish a program for a client or perhaps a salesperson might be able to get away for an unlimited time after he or she has met a required sales quota.
It also helps, Schwartz explained, if the workers do a lot of their tasks independently. “Where you have a team working together or where productivity is driven in a different way, these policies might not work,” she said. Clearly, if one team member is sunbathing in the Caribbean, while his or her counterparts are working hard on a group task at headquarters, there could be trouble ahead.
For in-house counsel and the human resources team, there are a few caveats to consider when drafting and enforcing an unlimited vacation policy. According to Schwartz, although it’s rare that an employee uses bad judgment and abuses the privilege, it’s still important to keep some ground rules in place.
“You can’t just wake up in the morning and say: ‘I’ll show up when I feel like it,’” Schwartz said. Employees should still be required to ask permission from HR or their supervisor to take vacation, and there should be standards as to how far in advance the request is filed.
In addition, she advises that employers make sure the unlimited vacation policy says that “time off is subject to the employee accomplishing professional responsibilities.” If the company or a client needs the employee to stick around the office, they should.
Adopters of the unlimited vacation policy should also be wary of the potential for disparate-treatment claims, particularly, if the work employees are doing is not project-based. “If you have no cap on the days, and one employee gets a month off but then another one, due to schedule or workload, is not allowed to take an entire month off and gets two weeks, then there could be a claim of disparate treatment, especially if the employee is of a different demographic characteristic,” noted Schwartz.