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Is an Employee entitled to PTO after they are terminated or quit?

A recent ruling by the Minnesota Supreme Court discussed the issue of whether an employee is owed PTO at the time of the termination of their employment.

Case Background

Donald Hall was fired by the City of Plainview in 2017. At the time of his termination, he had more than 1,700 hours of unused paid time off (PTO), and demanded to be paid the PTO he had accrued. The City declined to pay him stating there was no contractual obligation to pay him because the Employee Handbook had a disclaimer that the Employee Handbook was not a contract. Donald Hall sued to collect the money owed to him based on breach of contract, violation of Minn. Stat. 181.13 (Payment of Wages Statute) and unjust enrichment.

The Employee Handbook for the City had a disclaimer in its introduction that the Employee Handbook was not meant “to create an express or implied contract of employment.” Under the Handbook’s section on paid time off, it stated any unused PTO would not be paid unless the employee gave “sufficient notice” of two weeks.

Mr. Hall filed a breach of contract lawsuit against the City, and the district court granted the City’s motion to dismiss the case. Mr. Hall appealed the case to the Minnesota Court of Appeals which affirmed the decision of the district court. Mr. Hall appealed his case to the Minnesota Supreme Court and they agreed to review it.

The primary questions for the Minnesota Supreme Court are:

  1. Was the Handbook’s disclaimer language sufficient to defeat Hall’s claim for PTO payment?.
  2. Does Minn. Stat. 181.13(a) create an independent substantive right to payment of accruedPTO in the absence of a contract between the employer and the employee or some other reason under the statute?

The Minnesota Supreme Court’s answer was no to both questions. The Court determined the Handbook provision mentioning unused PTO could create a unilateral contract if it had definite terms communicated by the employer which were accepted by the employee, and the employee gave the appropriate consideration. The Minnesota Supreme Court concluded that the Employee Handbook was ambiguous as to whether unilateral contract was formed and remanded the issue to the district court for a trial on whether a contract was formed.

For the second question, the Court determined that Minn. Stat. 181.13 is a timing statute that does not create a right to PTO, but merely states that an employer must pay the PTO owed in a timely manner if a contract exists entitling the employee to payment of PTO.

This case makes it clear that employees and employers must have clear contractual language stating whether PTO is paid out or not paid when an employee is terminated or quits. Holden Law Firm represents employees and small businesses with drafting, negotiating and litigation of employment contracts. Contact Holden Law Firm and ask to speak to John Holden to discuss your employment contact law questions.

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