Is accrued vacation time a debt if a company closes their doors?

UPDATED: Sep 30, 2022

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Is accrued vacation time a debt if a company closes their doors?

I worked for a small incorporated company on a government contract for 5 years and accrued 15 days of vacation per year and was allowed to roll the days over from one year to the next. The company announced that it was going out of business in a week. I had informed the company a month in advance of when I intended to use part of my leave which was the week after the day they stated as the last day. When I asked about my vacation time they stated that our state does not require for them to pay vacation when a person leaves a company. I replied back that I did not leave/quit and was not fired; the business closed down. If my vacation was accrued on time that I had worked and this was unpaid compensation based on worked hours, how can they close and not pay their employee benefits? The company was owned and the owner and spouse worked from their home. I worked from home in another state and they used my home address for their business license in my state. There were also 2 employees from a third state that this happened to. Can we do a class action from any state they performed business in?

Asked on October 10, 2016 under Employment Labor Law, Virginia


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

In your state, when employment terminates for *any* reason--including the company closing its doors--the employer must only pay out the acrued but unused vacation time if there was a written contract or written policy clearly and unequivocally requiring them to do so. Otherwise, in the absence of anything in writing requiring payment, the company is free to pay if it wants to--but is not required to pay; it is their choice.
Also, if the company were an LLC or corporation and is insolvent or has been dissolved, even there had been something in writing guarantying your this money, you'd still likely not collect or recover anything: you can only sue the LLC or corporation itself, not its owners or managers, for business debts, including to employees, so if the business has no money or is out of business, there is no money for you to get.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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