High Court Refuses to Hear Denny's Appeal Over Employee Vacation Time

The Supreme Court declined to step into a dispute Tuesday over whether a restaurant chain must pay its employees for unused vacation time if they quit or are fired within a year. The Court rejected the attempt by Denny's Inc. to stop a lawsuit in California state court over its vacation plan, which says hourly employees can't be compensated for accrued vacation days until completing one year of service.

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The Supreme Court declined to step into a dispute Tuesday over whether a restaurant chain must pay its employees for unused vacation time if they quit or are fired within a year. The Court, without comment, rejected the attempt by Denny’s Inc. to stop a lawsuit in California state court over its vacation plan, which says hourly employees can’t be compensated for accrued vacation days until completing one year of service. California law guarantees payment of vested vacation when workers leave their jobs, and officials are seeking unpaid vacation wages for the employees. Denny’s countered its plan is governed by the more lax federal Employee Retirement Income Security Act (ERISA), which allows the practice. It asked that a federal judge in South Carolina — where the vacation plan is administered — to rule first on which law applies before the California court can consider the state law claims. The 4th U.S. Circuit Court of Appeals in April ruled the federal Anti-Injunction Act bars a federal judge from intervening in state cases involving ERISA, drawing the appeal and ire of restaurant groups who fear added exposure to lawsuits in state court. At stake is the vacation benefits available for tens of thousands of workers in the fast-food industry and other high-turnover jobs. According to AARP, many businesses seek to style their vacation plans as ERISA plans to avoid complying with tougher state labor laws. “In addition to litigation costs, employers may face substantial exposure to liability under pre-empted state laws,” the National Council of Chain Restaurants argues in its friend-of-the-court filing in support of Denny’s. The case is Denny’s v. Cake, 04-6. Copyright 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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