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To Offer Sabbaticals or Not to Offer Sabbaticals… And if I Do, Should I Pay?

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A Tale of Two Tricky (and Sometimes Dangerous) Dilemmas

Recently, I gave a webinar on establishing eligibility and procedures for taking sabbaticals and unpaid leaves of absence through Lorman Education Services. I thought some of the information I discussed might be of interest to our clients in the San Luis Obispo area, many of whom are cutting edge technology companies. This blog post will focus on sabbaticals, which are gaining popularity as companies struggle to recruit and retain talented, top-notch employees.

Traditionally, sabbaticals existed in the world of academia. They were typically paid (at full or half salary) leaves lasting from six months to one year, granted after seven years of service to a University, and required the employee to undertake a course of study, write a book or participate in other activities sanctioned in advance by the University. While the sabbatical was meant to refresh and rejuvenate the employee, it was also meant to result in added value to the University.

Today, many companies outside of academia are offering sabbaticals. In some cases, the sabbatical is meant to entice potential employees to come and work for the company, especially in high-stress positions where there is a great deal of competition for employees with rare and/or highly-valued skills and training. These sabbaticals are not always paid, and many companies today offer unpaid sabbaticals. As you can imagine, the types of employees who take unpaid sabbaticals are those who are highly compensated and can afford to take up to six months of unpaid leave.

Paid sabbaticals are still granted in academic settings where employees are not as highly compensated, but also in other industries where the additional skills, training and experiences gained during a sabbatical directly add to the quality of the employee’s work (and thus add value to the employer). For example, Intel, Adobe, Advanced Micro Devices, Genentech, eBay and Apple all offer paid sabbaticals to their employees. In the case of Intel (which offers eight weeks of fully paid sabbatical after 5-7 years with the company), in addition to working for the company for the requisite number of years, the employee must be a top performer. According to Intel spokesperson Gail Dundas, employees come back from their sabbaticals “renewed and ready to innovate.”

Unpaid sabbaticals typically do not have strict requirements as to what the employee must be doing on the sabbatical and are offered more as a means of rejuvenation and as an incentive to continued employment. These types of sabbaticals do not present as many problems from a legal standpoint, aside from the requirement that they be offered in a nondiscriminatory manner. Paid sabbatical policies, on the other hand, present a large risk to employers if they are not designed and implemented properly.

Imagine a situation where you offer your employees eight weeks of fully paid sabbatical leave after they have completed seven years of employment. Employees taking a sabbatical are not required to have a particular purpose or to account for how their time is spent while on leave, but instead are granted the sabbatical time to rest, rejuvenate and do whatever they like. Your policy says that, if they leave the company prior to taking their sabbatical, the leave is forfeited.

These facts in the preceding paragraph are similar to those in an actual California case entitled Paton v. Advanced Micro Devices, Inc. (2011) 197 Cal. App. 4th 1505. Advanced Micro Devices (“AMD”) was sued by a class of 1,432 former employees who claimed that the company had failed to pay them for sabbatical time they had earned but had not used at the time they left the company. In addition to employees who had worked for AMD for the requisite seven years and claimed that their right to the sabbatical had vested, the class included employees who had worked at AMD for less than seven years, and who were claiming that they were entitled to pay for the unused sabbatical in proportion to the time they had worked for the company.

Do you see the problem here? Corporate sabbaticals that are granted based only upon length of service and that impose no conditions on the time away share elements with regular vacations. California Labor Code § 227.3 prohibits employers from forcing employees to forfeit vested vacation time upon termination.

So, with paid sabbaticals, what distinguishes them from a vacation? The AMD court concluded that vacation is paid time off that: (1) accrues in proportion to the length of service; (2) is not conditioned on the occurrence of an event or condition; and (3) usually doesn’t impose conditions on the employee’s use of the time away.

In contrast, sabbatical leave is: (1) granted infrequently; (2) long enough to achieve the employer’s purpose, and longer than the time normally offered as vacation; (3) granted in addition to regular vacation (the regular vacation policy should be comparable to the average vacation offered in the relevant market); and (4) intended to retain valued employees, and therefore should incorporate some feature that demonstrates that the employee taking the leave is expected to return to work for the employer afterward.

The stakes are high for employers, and it is important to get it right if you are going to offer sabbaticals to your employees. If you would like assistance evaluating or implementing a sabbatical policy, please contact me or one of our other attorneys at (805) 546-8785. The attorneys at Carmel & Naccasha are experienced in handling such matters and are happy to answer your questions and assist you.

The information contained in this article does not constitute legal advice and neither the author nor Carmel & Naccasha make any representations or warranties as to the accuracy of the information contained herein. Your access or reading of the article and/or your following of any of the suggestions contained herein do not create an attorney-client relationship between you and the author or you and Carmel & Naccasha LLP.