Background
Clayton Creason worked as an engineer for Elanco US from November 2017 to November 2021. During his employment, he participated in a vacation buy program where he agreed to reduce his weekly salary by approximately eighty-four dollars in exchange for a fourth week of paid leave. After quitting, Creason sued under the Indiana Wage Payment Statute, claiming the salary reduction was an illegal assignment of wages and that he was owed pay for unused vacation hours carried over from the previous year. The case was removed to federal court under the Class Action Fairness Act, and the district court granted summary judgment in favor of Elanco.
The court’s reasoning
The Seventh Circuit first addressed whether the district court properly retained jurisdiction despite the Class Action Fairness Act’s home-state exception. The court found that while the exception applied, Creason failed to move for remand within a reasonable time after acquiring evidence that the exception was met. On the merits, the court held that the vacation buy program did not involve an assignment of wages because the employee simply accepted a lower base wage rather than having funds deducted and held in escrow. Regarding the unused vacation hours, the court ruled that Indiana law does not require payment for unused vacation time unless the employer has promised to pay it, and Elanco had not made such a promise for the carried-over hours.
There was no assignment, because there was nothing to assign.
What it means going forward
Employers in Indiana may structure vacation buy programs as salary reductions without triggering wage assignment requirements, and they are not liable for paying out unused vacation time unless a specific promise to do so exists.