Many municipal Minnesota employers allow retiring workers to cash out some or all of their unused leave, as part of negotiated benefits agreements. The option is generally offered as a strategy for retaining long-term employees. In times of recession, however, the practice threatens to overstretch the budgets of some city or county governments.
In a recent example, Hennepin County’s chief information officer retired after 38 years of service and received a lump sum payment of $87,776 for unused leave. The county reports that, on average, retiring workers with at least 8 years of service are paid around 100 days of unused leave.
Last year, Hennepin County paid $4.8 million for unused leave, representing a 41% increase since 2007. According to a recent estimate, the county owes around $97 million to employees for this benefit. However, the budget only allocated $71 million for it, as of the end of 2010.
Many municipal employees are part of unions, which collectively bargain on their behalf for negotiated labor contracts. Those contracts typically specify how the employer will cash out vacation or sick leave benefits to eligible employees. For that reason, leave benefits vary by municipality, with differences present even between neighboring local governments.
For example, Minneapolis only pays unused leave benefits to employees with more than 20 years of service, and payments for unused vacation time are capped at 50 days. Eligible Minneapolis municipal retirees can also cash out 60 days of unused sick leave, to put the proceeds into a health savings account. St. Paul employees, in contrast, can receive cash for unused sick leave after 14 years of service, provided the money goes into a HSA.
If you have questions about the type of benefits your employer is contractually required to provide you, an attorney can review the applicable documents and law. In the event your employer has breached one of those terms, an attorney can also help you hold the employer liable.
Source: Business Management Daily, “Unused leave takes a bite out of municipal budgets,” July 22, 2012