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Owen v. Macy's

June 29, 2009


APPEAL from a judgment of the Superior Court of Los Angeles County. Peter Lichtman, Judge. Affirmed. (Los Angeles County Super. Ct. No. BC355629).

The opinion of the court was delivered by: Boren, P.J.


An employer is entitled to adopt a policy specifying "the amount of vacation pay an employee is entitled to be paid as wages," depending on length of service. (Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, 783 (Suastez).) The law permits an employer to offer new employees no vacation time: If an express written company policy forewarns new employees that their compensation package does not include paid vacation during their initial employment, then no vacation pay is earned and none is vested. When such a policy is in place, as it is in this appeal, employees cannot claim any right to vested vacation during their initial employment, because they know in advance that they will not earn or vest vacation pay during this period. The trial court correctly determined that plaintiff was not unlawfully denied vacation pay when her employment ended.


Appellant Lisa Owen began working as a sales associate at a Robinsons-May department store (Robinsons) in 1990. In August 2005, Robinsons was acquired by respondent Macy‟s, Inc. In January 2006, employees at the Robinsons in Arcadia where Owen worked were notified that the store would be permanently closed-and their jobs eliminated-by April 2006. Owen filled out a "career interest form" indicating that she was not interested in job placement at a Macy‟s department store. The Arcadia Robinsons closed on March 18, 2006. After the closure, Owen "was doing stuff" around the store, though there were other people "that didn‟t do anything and sat around all day." Owen‟s employment at Robinsons ended on April 14, 2006. Her separation summary shows that she was not credited with any unused vacation pay, but received $12,469 in severance and other pay, based on her years of service.

In July 2006, Owen filed suit alleging that Robinsons failed to pay her accrued, vested vacation compensation, in violation of the Labor Code. Owen also alleged that Robinsons‟ conduct was an unlawful business practice, in violation of the Business and Professions Code. In an amended pleading, she added a claim for breach of the implied covenant of good faith and fair dealing. The lawsuit is styled as a class action on behalf of all similarly situated Robinsons employees.*fn1

The Robinsons employee handbook provides that "All eligible associates earn and vest in paid vacation after they have completed six months of continuous employment. The vacation year is May 1 through April 30. Vacation is earned in the same vacation year that it accrues and vests." The handbook specifies that "Associates whose employment terminates for any reason other than retirement will receive all vested but unused vacation."

Thus, Robinsons imposes a six-month waiting period before new employees begin to earn vacation.*fn2 The employee handbook states that "Associates who have completed at least six months of continuous service as of May 1 and who have worked at least 1000 hours during the prior vacation year will be eligible for paid vacation . . . ." The amount of vacation time depends on the employee‟s length of service with Robinsons. Employees who have worked for six months to one year receive a prorated amount of vacation, i.e., several days. Someone who worked at Robinsons for five months then quit to take another job would not earn or vest in vacation time.

The Robinsons handbook states that "Beginning each May 1, you accrue and vest in up to 50% of your annual vacation amount and on August 1, you accrue and vest in up to [the remaining] 50% of your annual vacation amount." According to a former Robinsons executive, this last provision means that employees‟ annual vacation vested before it was actually earned. The executive testified that in some companies, employees earn vacation as each month passes. At Robinsons, the company assumed that the employee would remain employed the entire year. Proceeding "on good faith," Robinsons gave the employee an entire year‟s vacation by August 1, "even though you hadn‟t worked through that new vacation year yet." Thus, the entire vacation vests prior to an employee‟s earning his or her full entitlement. However, employees who leave on or before April 30 of any given year would not receive the first half of their vacation entitlement for the vacation year beginning May 1.

Owen testified that she took all three weeks of the vacation time to which she was entitled during the vacation years running from May 1 to April 30 in 2002-2003; 2003-2004; 2004-2005; and 2005-2006. Inconsistently, her declaration states, "I . . . took none of the vacation time or pay I earned by working between May 1, 2005 and my termination date of April 14, 2006." Owen claims that she is entitled to four weeks of vacation pay for the vacation period running from May 1, 2006, to April 30, 2007 (i.e., after her job ended).

Owen was asked in a deposition, "And why did you conclude in your mind that you were entitled to four weeks for this May 1, 2006, to April 30, 2007, vacation?" She replied, "I don‟t know how-I don‟t know why." When pressed, she said, "I just felt we were entitled to it," adding, "Why wouldn‟t they just keep us for another two weeks to get our vacation pay?" Some Robinsons employees in the corporate office were fortunate enough to remain on the company payroll until May 1, 2006, and received vacation pay for the vacation year starting on May 1, 2006.

Robinsons brought a motion for summary judgment, arguing that Owen‟s claims fail as a matter of law because she was not denied any accrued vacation benefits, and the company took no action to deprive her of vacation benefits by terminating her employment only two weeks before the 2006-2007 vacation year began, while allowing corporate office employees to remain on the job until May 1. Owen opposed the motion, arguing that Robinsons violated state law by imposing a six-month waiting period on new employees before vacation benefits began, and by requiring her to forfeit vacation pay for 2006-2007, pay which she believes she earned during the preceding year. Finally, she argued that Robinsons deliberately timed her layoff date to prevent her from receiving vacation pay on May 1.


In its ruling, the trial court acknowledged the parties‟ polar positions: Robinsons believes that under its policy, vacation vests before it is earned, while Owen believes that vacation vests after it is earned. The court acknowledged that state law prohibits a "use it or lose it" policy with respect to vacation pay: if an employer offers vacation benefits, it is required to pay for all vested vacation upon termination of employment. The court rejected Owen‟s contention that an employer must offer vacation benefits from the first day of employment because state law does not "dictate[] the point at which a company providing vacation benefits must begin to provide them." The employer "is free to determine when an ...

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