Is a “use it or lose it” vacation policy legal?

My employer’s vacation policy provides that if I do not use all of my annual vacation entitlement by the end of the year, that I lose the unused balance. Is this legal in TN..

Asked on September 22, 2010 under Business Law, Tennessee


M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Many companies have policies that prevent you from banking your vacation days from year-to-year in order to take a longer vacation.  Employersfeel that such a policy prevents employees from getting burned out if they take time off at regular intervals, or it is a burden on other employees and impacts the functioning of the workplace to have employees take long vacations. Also, an employer may want to limit its financial exposure in the event an employee leaves the company and must be paid for accrued hours.  Bottom line, such a policy doesn't violate the law. 

Note:  Employers are not legally compelled to grant vacation time at all.

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