Getting Paid Service Contract Act Vacation Benefits When Not Working

“The foundation of success in life is good health: that is the substratum fortune; it is also the basis of happiness. A person cannot accumulate a fortune very well when he is sick.” 

--P. T. Barnum

 Apparently, Mr. Barnum never had to deal with the Service Contract Act (“SCA”).  

A client asks: 

We have an employee that was out on a medical leave of absence for more than one year and has returned to duty. Our question is regarding accrual of SCA required vacation. We are aware the DOL regulations offer the example of a 6 month medical leave of absence not being a break in service and therefore the employee receives his vacation. We’re just checking to see if such a long period of medical leave provides for any different requirement. Should the employee receive a retro accrual of vacation upon his return from medical leave?  

The answer lies in the Department of Labor SCA regulations.  Those “break in service” rules state that: 

Whether or not there is a break in the continuity of service so as to make an employee ineligible for a vacation benefit is dependent on the facts in the particular case. No fixed time period has been established for determining whether an employee has a break in service. Rather… the reason(s) for an employee’s absence from work is the primary factor in determining whether a break in service occurred. 

29 C.F.R. 4.173(b).  

However, the regulations go on to say that where the employee is given leave with or without pay for absences for sickness or injury, “there would not be a break in service.”  29 C.F.R. 4.173(b)(1) (emphasis added). The example in the regulations of an absence for five months for illness is just illustrative.  Id. 4.173(b)(1)(i). The Administrative Review Board in similar circumstances has said the time period set forth in the regulation is just as an example, and it is not meaningful or controlling. Longer time periods don’t make it a break in service if the absence is for injury or illness.  

Applying these rules to the facts, there likely has been no break in service. It likely doesn’t matter how long the leave is. All that is important is that the absence related to illness, so there is no break in service. When the employee returned to work, he or she likely became entitled to the vacation benefit that accrued during their leave period that would have otherwise been due earlier. If the employee doesn’t get to use that vacation in the truncated annual period of work left, it should be cashed out on the next anniversary date of employment and a new grant of vacation furnished to be used thereafter.  

This isn’t exactly employer friendly or even fair, but that is how DOL wrote its rule.