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December 17, 2010

Liquidation of employee leave credits upon separation

Liquidation of employee leave credits upon separation
Source: A question of general interest submitted by a NYPPL reader

A NYPPL reader asks: "Should an employee be separated from his or her public employment what happens to the employees leave accruals? Is the municipality allowed to keep the money? Where does the money go?”

The most common types of leave accruals or credits that may be credited to an individual at the time of his or her separation are 1. Vacation Leave accruals, 2. Sick Leave accruals, 3. Personnel Leave credits; 4. Overtime credit, and 5. Compensatory leave credit.
The most common types of personnel transactions in which the question may arise are in the context of a resignation, retirement or death or upon termination for cause [see, generally, 4 NYCRR 23.1].

Less common are situations where the liquidation or use of leave credits is coupled with a leave of absence [see, for example, Civil Service Law §§71 and 72], a transfer [see 4 NYCRR 23.3], absence for military leave [see 4 NYCRR 23.2], a layoff, or a jurisdictional reclassification of an individual’s position [see, for example, Education Law §355.10(c).

The New York State Civil Service Commission's Rules for the Classified Service, 4 NYCRR 30.1, provides for the payment of certain leave accruals upon separation. Many local employees are subject to similar rules or regulations promulgated by a local civil service commission or set out in a collective bargaining agreement.

In addition, there may be provisions set out in an “employment contract” between a public employer and an individual that may be controlling as could be the case with respect to a contract between a school district and its school superintendent.

The State Commission's Rules basically provide that at the time of separation from State service, the employee or the employee’s estate or beneficiary, as the case may be, shall be paid in cash for unused vacation credits not in excess of 30 days. The Commission’s Rules, however, do not provide for the payment of unused sick leave* or personal leave credits [see 4 NYCRR 21.5(b)].

However, the Rules also set out two significant exceptions to such liquidation:

1. In the case of resignation, the appointing authority may require, as a condition for receiving payment for accrued but unused annual leave credit, that employee provide written notice of his or her resignation at least two weeks prior to the last day of work; and

2. No employee [subject to the Commission's Rules] who is removed from State service as a result of disciplinary action, or who resigns after being served with charges of incompetency or misconduct shall be entitled to compensation for vacation credits.

It should be noted that both these limitations apply only to "vacation accruals."

“Overtime accruals" and “compensatory time credit” are distinguished from vacation accruals, as they are provided as a result of work performed. As such accruals and credits are provided in lieu of cash compensation, they constitute "earnings" or "salary" for actual service rather than a fringe benefit such as "vacation leave credits" and up to 30 days of each may be liquidated in cash upon separation [see 4 NYCRR 23.3].

Under certain circumstances, however, it appears that the payment of vacation accruals will be madatory. For example, in Clift v City of Syracuse, 45 AD2d 596, the Appellate Division ruled that if an employee was refused permission to use his or her leave credits and was subsequently terminated, the individual was entitled to payment for his or her unused vacation accruals.

Another decision, Degnan v Constantine, 189 AD2d 423, illustrates the strict construction courts generally give to regulations involving the forfeiture of leave credits.

Degnan, a State Trooper, was eligible to retire when charges of misconduct were filed against him. In order to avoid a disciplinary hearing he "accelerated his original date of retirement."

After he retired Degnan asked for payment for the 30 days of unused vacation leave he had to his credit at the time of his retirement. State Police rejected his request, advising him that because he had resigned from service "in order to evade the charges pending" against him at the time his leave credits were, in effect, forfeited.

The Appellate Division ruled that "the clear and unambiguous language of [Division's] regulations requires that [Degnan] be compensated for up to 30 days of accrued annual leave...." as Degnan, faced with disciplinary charges, did not resign -- he retired instead.

The Appellate Division said that "it is axiomatic that an agency is bound by the language of its own regulations and cannot construe it in such a manner that the plain language on the face of the regulation is rendered meaningless."

In the words of the Appellate Division, "obviously had [the Division of State Police] intended that accrued vacation time be withheld in the case where a member retires during the pendency of disciplinary charges, the regulations would have so provided."

Another element to consider: the impact the Taylor Law. Does the relevant collective bargaining agreement set out the terms and conditions for the liquidation of leave credits upon separation? Could the liquidation of leave credits upon separation be deemed a "past practice" within the meaning of the Taylor Law? The answer is yes to both!

PERB has ruled that the liquidation of leave credits is a mandatory subject of collective bargaining and thus a unilateral changing of a past practice concerning the liquidation of leave credits in cash constituted an unfair labor practice [Center Moriches Administrators Association and Center Moriches UFSD, 28 PERB 3031].

Recent court rulings in which the payment of accrued leave credits upon separation was an issue include:

Boakye-Yiadom v Roosevelt Union Free School Dist., 25 Misc 3d 1226(A)
The decision is posted on the Internet at:;

Garrigan v Incorporated Vil. of Malverne, 59 AD3d 662
The decision is posted on the Internet at:;

Hauptman v Village of Elmira Hgts., 23 Misc 3d 439
The decision is posted on the Internet at:;

Matter of Curra v New York State Teachers' Retirement Sys., 18 Misc 3d 1144(A)
The decision is posted on the Internet at:; and

Matter of Palandra v New York State Teachers' Retirement Sys., 27 Misc 3d 1214(A)
The decision is posted on the Internet at: .

* Employees of the State as an employer retiring with unused sick leave credits may have the actuarial value of such credits applied towards the payment of contributions otherwise required for their NYSHIP health insurance premiums upon retirement [see Civil Service Law §167.4] and, in addition, may receive additional “years of service” credit in determining their retirement allowance [see Retirement and Social Security Law §41.3.j].


Subsequent court and administrative rulings, or changes to laws, rules and regulations may have modified or clarified or vacated or reversed the decisions summarized here. Accordingly, these summaries should be Shepardized® or otherwise checked to make certain that the most recent information is being considered by the reader.
New York Public Personnel Law Blog Editor Harvey Randall served as Principal Attorney, New York State Department of Civil Service; Director of Personnel, SUNY Central Administration; Director of Research, Governor’s Office of Employee Relations; and Staff Judge Advocate General, New York Guard. Consistent with the Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations, the material posted to this blog is presented with the understanding that neither the publisher nor members of the NYPPL staff are providing legal advice to the reader and in the event legal or other expert assistance is needed, the reader is urged to seek such advice from a knowledgeable professional.
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