Personal time off and the at will employee: saved by the appeal

Personal time off and the at will employee: saved by the appeal

When an employer states in its paid time off policy that its at will employees are entitled to five days off immediately upon hire, does this grant become a vested benefit?  This was the issue in MSX International v. Hurley, an unpublished decision of the Michigan Court of Appeals.  What is of particular interest in this case is that the dispute was submitted to arbitration in accordance with the company's dispute resolution process, and the employee won.

An arbitrator reviewed the facts and determined that under the policy, the employee was entitled to the paid time off.  An award was entered in favor of the employee.  The company filed an action to overturn the award which was denied.  On appeal, the court of appeals reversed the trial court in a 2-1 opinion.

The majority reviewed the Michigan cases dealing with at will employment, legitimate expectations, and vesting of employee rights.  It noted that the company had specifically retained the right to modify, revoke, suspend, change, or terminate any employee benefit at any time.  It also found that there was no vesting of rights since the benefit was granted to the employee as soon as he began to work and was therefore a "gratuity" and not compensation for time spent working for the company.  There was no discussion of the impact of the arbitration decision and the basis to vacate the award.

The dissent emphasized that the majority decision was an intrusion into the arbitration process by accepting the company's invitation to revisit the dispute and to conduct an independent analysis of the dispute.  This is not the role of the court.  The majority went well beyond determining whether the arbitrator exceeded his authority or whether there was an error of law clear on the face of the award itself.

Employers cannot expect to be as fortunate as the employer in this case in terms of being rescued from an adverse arbitration award.  An employer should review its policies with respect to benefits and make clear when and if they vest.  It would be interesting to see what the specific terms of the dispute resolution policy say about the ability of the employer to change that policy.

Lexis.com subscribers can access a Lexis enhanced version of the Msx Int'l Platform Servs. v. Hurley, 2012 Mich. App. LEXIS 993 (Mich. Ct. App. May 22, 2012) decision with summary, headnotes, and Shepard's.

For additional Labor and Employment law insights from John Holmquist, visit the Michigan Employment Law Connection.

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