Public Versus Private: Different Sets of Rules

Mar. 2, 2010

The recent stories of state workers abusing vacation policies and comp-time serves as another reminder that there are two sets of rules and laws in California — one for private sector employers and one for the state and union-friendly employers.

According to a February 28, 2010 Sacramento Bee story — originally reported by California Watch — state employees have been receiving excessively large vacation payouts upon retirement or  termination despite the cap of 80 days of vacation accrual. “Records show that supervisors routinely allow state employees to exceed that limit,” reported the Bee. “State personnel officials acknowledge that at least $100 million, and perhaps tens of millions more, was paid between 2006 and mid-2009 to retiring state employees who went over the state caps.”

Most private employers do not allow employees to roll over unused vacation from year to year. Not only would it would be nearly impossible to pay such large amounts in one lump sum, planning financially for the future payments  is not realistic for businesses. Just as with California’s unfunded pensions, when government makes unrealistic promises to employees, the state’s inability to continue to pay these benefits makes for a house of cards.

According to the Department of Industrial Relations (DIR), the state agency that manages working conditions for California’s wage earners and oversees employment law, most state employees are allowed to bank up to 80 days (640 hours) worth of unused vacation, which is then paid in a lump sum when they leave state service.

For private sector employers, a more realistic and typical cap on vacation time is 200 hours (25 days) in one year, according to employment law attorneys. Some employers even pay employees for their unused vacation at the end of each year instead of capping the accrual.

Using the state’s practice, a public employee who earns $60,000 a year would receive a check upon retirement or termination for $18,461 for 80 days of unused vacation, whereas a cap of 25 days (200 hours) of unused vacation hours would make the payout just $5,769.

In the private sector, a standard for paid time-off benefits is nine to 12 paid holidays, one to four weeks of vacation per year based on length of service with a company or industry, and often a few sick leave days or floating personal days. A typical first year employee can receive a total of 17 days off in a year, or 136 hours or paid time off which includes holidays, sick days and five vacation days.

In a standard employment year, a full-time employee works 2,080 hours (260 days). One week of vacation is considered 40 hours, four weeks is 180 hours, and six weeks of vacation is 240 hours. Never mind that individual state employees may carry more than six weeks of unused vacation on the state’s books, the law is written allowing state employees to carry 16 weeks of unused vacation for eventual payout, and that law is being abused.

Vacation is supposed to be used within the year as labor laws were written to ensure that employees received proper time off when working full-time. The California Labor Commissioner allows employers to cap or put a “ceiling” on vacation pay accruals, which most private sector employers include in their policies according to labor attorneys. When then does the state not use this policy?

The problem with the law is that state agency managers are supposed to make sure their employees stay under the cap, except under “extenuating circumstances.” This language turns the cap into nothing more than a recommendation.

Since vacation time is an earned benefit, it’s treated legally as earned wages. In California, it’s unlawful to have a use-it-or lose-it policy, and an employee cannot forfeit earned wages. Employers, as well as the state, can direct and control when vacation time will be used by the employee, and how much is taken at one time.

The abuse of comp time is problematic with the state as well. Most private sector employers are heavily discouraged by employment law attorneys from using comp time, as it is extremely difficult to manage and fraught with legal intricacies. The way the laws are written, the use of comp time defeats the purpose of having such a benefit. But collective bargaining agreements seem to sidestep the legalities.

In fact, collective bargaining agreements are out of control, as shown by the California Department of Personnel Administration’s attempted crack down on the vacation-payout cap during labor talks in 2005. But they ended up giving in to the unions. This state department, which oversees employment issues for all 237,000 state employees, caved to public employee unions, costing taxpayers hundreds of millions of unnecessary dollars in unused vacation and comp time, demonstrating that many of those in charge at the state appear to be reckless and unconcerned with how they spend other people’s money.

The DIR’s homepage says the department was “established to improve working conditions for California’s wage earners, and to advance opportunities for profitable employment in California.” For state employees, the word “profitable” doesn’t even begin to describe their situation.

-Katy Grimes