On May 3, 2013, in the Fisher and Norton cases, the Nebraska Supreme Court decided that earned but unused paid time off (“PTO”) constituted “vacation” under the Nebraska Wage Payment and Collection Act, and that Nebraska employers were obligated to pay PTO to departing employees, even though a part of PTO was designed to replace sick leave. The decision came in a spirited 4 – 3 decision, with a vigorous dissent by three of the Justices.
Today, the Supreme Court denied a Motion for Rehearing regarding this decision. It had been hoped that the Supreme Court would examine the legislative history upon rehearing, as both the majority and the dissent decided that the language of the statute was perfectly clear, but then came to diametrically opposed conclusions.
The majority opinion held that while there was a condition precedent for the use of such leave as sick leave (and, presumably bereavement leave), there was no condition precedent for the use of PTO and it could be used at the will of the employee. Therefore, the majority found that it must be paid to employees upon their separation from employment under the statute as it was more akin to vacation leave. The majority also concluded that if it held otherwise, Nebraska employers would be allowed to circumvent the statutory requirements that it pay a separated employee for vacation leave. The dissent pointed out that the statute did not define “vacation leave.” It concluded that “vacation leave” should be narrowly defined to mean only that leave which is used for vacation and defined PTO to mean a much broader form of paid leave, which provides an employee with flexibility to use PTO for any purpose. It concluded that the employer had provided a different type of paid leave which falls within the general rule of the statute that all other types of paid leave should not be paid upon separation. It concluded “[a] herd of elephants cannot be fairly characterized as a herd of zebras simply because one zebra is traveling with the elephants. By treating multi-purpose PTO as defined in the [employer’s] policy as the equivalent of vacation leave simply because vacation leave is one of the purposes for which it can be used, the majority’s reasoning permits the exception to swallow the rule.”
Obviously, by the denial of the Motion for Rehearing, the original decision of May 3, 2013 stands. Although the dissent invited further legislative action, it is not known whether such action will be taken.
The essence of the majority opinion is that paid leave can be divided into two categories: (1) leave which requires a specific act or condition as a condition precedent, such as injury and illness for use of sick leave, and the death of a relative or of a person within a defined group to qualify for bereavement leave; and (2) most, if not all other types of leave, which can be used at will, including PTO. It appears that with this second category, the rule in Fisher and Norton will be that payment of earned but unused leave will be required to be paid to employees upon separation from employment.