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You say sabbatical, I say vacation

August 8, 2011

With profuse apologies to the Gershwins.  This post is not about show tunes.  It’s about a new case from the California court of appeal, which offers good insight on how courts out here view vacation and related matters.

In Paton v. Advanced Micro Devices, the court faced the question whether a promised company sabbatical (remember when some tech employers — and even law firms — offered those?) constituted “extra vacation” which had to be paid if not taken by the employee before his employment ended.  AMD offered paid eight-week sabbaticals to salaried employees after seven years of service.  (Later the program was changed to offer four-week sabbaticals for employees after five years of service, and the program was later abolished entirely.)  Eric Paton was a salaried employee who worked for AMD for seven years, but (for a variety of reasons) never got his sabbatical.

When he quit, Paton contended that he should be paid for the sabbatical, because it was (in Paton’s view) “really just extra vacation.”  And, as we all now know, a departing employee must be paid for accrued but unused vacation when he leaves.  When AMD refused, Paton filed a class action suit seeking the usual remedies (back pay, penalties, and, let us never forget, attorneys’ fees).  The trial court threw the suit out, finding that the sabbatical program was not equivalent to vacation.

The court of appeal said not so fast.  First, the court (admirably) tried to come up with a workable definition of “vacation” under California law, something that no court had yet tried to do.  After reviewing prior legal and regulatory pronouncements on the subject, the court stated:

We take from the foregoing a rough idea of what constitutes vacation.  It is paid time off that accrues in proportion to the length of the employee’s service, is not conditioned upon the occurrence of any event or condition [like a particular length of service, or an illness], and usually does not impose conditions upon the employee’s use of the time away from work [as compared to a traditional academic sabbatical for research or scholarship purposes].

Next, the court compared corporate sabbatical programs in general to its  “rough idea” of vacation:

By attempting to incorporate the characteristics of a traditional sabbatical into the [non-binding regulatory] test, the Labor Commissioner implicitly recognized that legitimate sabbaticals would be those that were designed to achieve purposes similar to the purposes for which traditional sabbaticals are used, namely to provide incentive for experienced employees to continue with and improve their service to the employerWhere a corporate sabbatical is granted for a specified sabbatical project (other than rest and recreation) one would have little trouble concluding that it is not vacation.  The thornier problem is where the sabbatical is granted based only upon the length of service and is unconditional with regard to the employee’s use of the time away.  Such a program has elements in common with regular vacation.  But it could still be a legitimate sabbatical if the facts show that the leave is designed as an incentive for continued and improved performance by the most experienced employees and not merely as a reward for a prior period of service.

The court proposed a four-part test to determine whether a corporate sabbatical program was a “true sabbatical”, instructing lower courts and employers to consider: (1)  the frequency of the leave (the less frequent the leave, the more likely a sabbatical); (2) the length of the leave (the longer the leave, the more likely a sabbatical); (3) whether the leave supplants or supplements regular vacation (true sabbaticals are offered in addition to regular vacation); and (4) whether the program requires the employee to return to work after the sabbatical (yes, sabbatical; no, vacation).

Finally, the court looked at the specifics of AMD’s sabbatical program, and found it was too close a question for summary judgment:

As to the elements of plaintiff’s wage claim, the undisputed evidence shows that defendant’s sabbatical program contained the elements of a vacation.  It was based upon the employee’s length of service; if he worked seven (or five) years he was eligible for eight (or four) weeks off with pay.  Although the program required that the employee bring his performance up to company standards before he could use the leave, and it allowed defendant to postpone a planned leave if it had business reasons for the postponement, the written policy does not impose any conditions upon earning the time off.  Both the policy itself and the benefits brochure indicate that the employee was eligible after service for the prescribed number of years.  The leave was granted without any conditions as to how the time was to be spent and did not require the employee to account in any manner for what he or she did while away.

As to defendant’s claim that the leave was a legitimate sabbatical, defendant produced evidence to support that claim.  The policy provides that employees on sabbatical “will return to their same job,” which suggests that the program is designed as a retention incentive.  But that feature alone is not dispositive.  Although defendant asserted that the leave was also offered for a longer period than what was “normally” offered for vacation, and that it was not offered “too” frequently in that it was offered only every five or seven years, these are qualitative parameters upon which reasonable minds could differ.  If a jury were presented with only the sabbatical and vacation policies, we cannot say that a reasonable jury would reach but one conclusion.  It would not be unreasonable for a jury to decide that a four-week sabbatical is not “normally” longer than vacation of four-weeks, or that an eight-week sabbatical is not longer than that “normally” allowed for vacation where eight-weeks equals the length of time an employee could be gone on vacation if he took the maximum amount he could accrue all at once.  And, although we know that defendant also offered a vacation policy, we do not know how defendant’s vacation policy compared to vacation benefits offered by defendant’s competitors.

So what can employers and employees glean from the Paton case?

  • Get used to risk.  There’s no real guarantee with a sabbatical program, unless you’re a university or the California court system.  The court’s conclusion that a fact issue existed could be applied to virtually every sabbatical program that could be written.  And the four-part, no-single-part-conclusive, test proposed does not create a friendly environment for dispostive motions.
  • Length matters.  If you offer a sabbatical, make it long — much longer than your vacation accrual cap.
  • Leave out the welcome mat.  Make it clear that you expect employees to return to work.  A sabbatical should not be an early retirement program.  Obviously you can’t force them to return, but make the expectation clear.  And back it up with policies to get in touch with employees on sabbatical as their return date approaches.
  • Do it for a reason.  If you can tie the purpose of the sabbatical to something that will assist the employer upon return — research into a relevant academic field, for instance — do so.   By the same token, make sure that the sabbatical program materials state that the program is intended to induce long-term employees to stay, and to increase their productivity.

It will also be interesting to see what other purported synonyms of “vacation” come out of the woodwork after this opinion.  Any time a court says something can’t be decided on summary judgment, the employee bar smiles.

Something to remember during the next bubble.  Until then, sabbatical programs are likely to be rarer than hen’s teeth.  (Which aren’t that rare, but that’s another post for another blog.)

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