by John E. Motylinski (Winter 2016)

In November 2015, our office published a client alert regarding the Illinois Department of Labor’s new Illinois Wage Payment and Collection Act (“IWPCA”) regulations. There, we noted that a new addition to the Illinois Administrative Code prohibited the “forfeiture of earned vacation by a written employment policy of practice.” Under a strict reading, this language appears to outlaw “use it or lose it” vacation polices. Yet, as we also reported, the IDOL left intact an existing regulation allowing “use it or lose it” policies. In the wake of the IDOL’s amendments, the co-existence of these two provisions has puzzled observers, as they appear to be clearly contradictory.
However, new guidance from the IDOL indicates that the two regulations are not meant to conflict, and that employers may still implement “use it or lose it” vacation policies. Indeed, in passing the new regulation, the IDOL only sought to prevent scenarios where an employee earns vacation, the employee separates from the employer (or the employer changes the vacation policy), and the employer does not compensate the employee for any earned vacation time. Therefore, even though the two regulations appear contradictory, the IDOL has stressed that it did not mean to interfere with standing “use it or lose it” polices.

Accordingly, the IDOL has clarified that employers may validly implement “use it or lose it” policies. However, under the new IWPCA amendments, employers are still prohibited from reducing an employee’s earned vacation time outside of such a “use it or lose it” policy.