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August 1, 2002

Should you pay terminated employees for earned, but unused, vacation time when they leave?

Federal law contains no requirements regarding the payment of accrued wages, salaries, or vacation pay when an employee is separated from employment. However, such requirements may be imposed either by state law or by agreement between the parties (pursuant to employee handbooks, employment contracts, etc.). Because Ohio does not have a statute on the subject, the payment of "earned" but unused vacation time upon separation from employment is controlled by any promises that have been made to employees by an employer or any agreements that an employer has entered into with its employees.

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