If you are a C-Suite Executive you likely did not have time to read The State of America Vacation 2016 report issued by Project Time Off. The report, based upon interviews of employees from January 2015 through February 2016, indicates that in 2015, half of United States employees had unused vacation days totaling 658 million days. Although the report does not appear to distinguish between C-Suite executives and other employees with unused vacation days, every CFO and CEO knows that C-Suite executives work as necessary, 24/7, without regard to accumulated vacation time.
A recent case illustrates the point where La Quinta CCO, Angelo Lombardi, left the company in April of 2016. In addition to his severance pay, Mr. Lombardi was paid for 160 hours of unused vacation time totaling $36,153.85. Prior to that, there was the Bloomberg report in December of 2015 indicating that the Whole Foods Co-CEO had accumulated 2703 hours of unused time which translated to 338 days while Tim Cook of Apple Inc. was reimbursed $56,923 in 2014 for unused time.
Pay for Accumulated Vacation Days
There is no federal law that requires an employer to provide payment for unused vacation time. Therefore, if a senior executive is entitled to pay for unused vacation time, it must be included in the terms of a compensation agreement. Other C-Suite considerations regarding vacation time include:
When you first started with the company, as a lower level executive or even as a paid intern, you probably received a full week of paid time off after a year of employment. And as the years progressed as did your seniority with the company, the paid week of vacation time grew to 2 or even 3 weeks off. Fast forward to your time as a C-Suite executive and the reality is that no matter how much time you are allotted by the terms of your contract, you do not have the ability to use all of those days off.
To avoid having to make a large financial payment for unpaid vacation days, many companies are turning to unlimited vacations for those employees in the C-Suite. If this provision is included in your compensation package, you are entitled to take as much time off as you deem appropriate, but the downside is that vacation time is not accumulated and therefore there is no payment for unused days if or when you leave the company.
Paid Time Off (PTO)
Another option being used by companies involves Paid Time Off (PTO) where time off for any purpose, including vacation days, sick days and personal days, are all accumulated into a single account. A senior executive is allowed to take periodic time off away from the office at his or her discretion which is then deducted from the total days allotted regardless of the basis for the time off.
While you may not anticipate that your time with the company will ever come to an end before you are ready to retire, if that should happen it is important to speak to an experienced executive employment attorney to negotiate the payment of any unused vacation time into your severance package. Regardless of the terms of your compensation package, there may be a way to negotiate payment for all of your unused vacation time which may total thousands or even tens of thousands of dollars. Do not sign any severance agreement until you have at least explored this issue further.
Many companies acknowledge ten or more national holidays from Martin Luther King Jr. Day, through Labor Day and Christmas. Still, others acknowledge state or local holidays such as the closure of some businesses for Pulaski Day in Chicago or in Massachusetts for Patriot’s Day when the Boston Marathon is scheduled. The specific terms of your executive compensation agreement will dictate whether or not any of these unused paid days can or will translate to reimbursement down the road.
Every C-Suite executive has sacrificed personal time, including vacation days, for their company. An executive compensation attorney can review the nuances of your compensation and severance agreements and confirm that you are being properly compensated for all of those sacrifices.