If an employee is terminated for theft, fraud, etc., can a company refuse to pay them for vacation pay that is due to them?

I know that it is permissible for a company not to pay for unused vacation time at all no matter what the situation. I have seen companies that had a policy that said that. But I think this is probably a state law issue.

If your policy is to normally pay them, then I don't know the answer. It would be a good idea to have such a statement in your policy.

I know that employment-related lawsuits can be quite expensive to defend against even if you win. Getting the advice of an attorney would be a good idea. Unless you have a signed admission of guilt, I think you could have a lot of headaches.

To me, it seems like something that probably doesn't happen very often and I'd probably pay the vacation and be glad I'm rid of the person rather than worry about any potential headaches due to lawsuits for wrongful termination, discrimination, slander, etc.

Anonymous is incorrect - this matter is determined by state law, not company policy. You need to check your state's DOL web site, where you should be able to determine whether acrued time is considered earned income and must be paid, or whether the state leaves it up to the employer's discretion. Some state laws that do require vacation to be paid at termination also allow for not paying if the employee is termed due to gross misconduct, which you would have to justify to the state's wage and hour department if the termed employee files a complaint.

You may also want to check into the right of offset, if the employee stole funds from the bank. Again, state law will give you your answer.

Cheese,
Accrued vacation is an earned benefit under DOL regulations. If you have proof of loss, you can deduct the amount from their vacation pay to the extent the amount left is equal to the amount of minimum wage earned for the number of hours accrued.

Thanks. We are in the process of reviewing our employee handbook and under "Involuntary Termination" it reads, "An employee terminated for theft, deception or fraud forfeits all rights to vacation pay." It just doesn't sound like something we want to keep in there.

You need to change it. Sick leave can be forfeited entirely, but not vacation leave.