Two things seemed clear after a state Supreme Court ruling on vacation policy last year.

First of all, Nebraska employers must pay workers for unused vacation time when they are terminated.

Secondly, additional lawsuits or legislation will be needed to address an array of questions raised by the October ruling.

“I can say it has caused some confusion among employers as to what they need to do to comply with the law,” said Jerry Pigsley, a Lincoln attorney who specializes in employment law. “It’ll be interesting to see how it all plays out.”

The Supreme Court ruled in Mike Roseland v. Strategic Staff Management that unused earned vacation time is due and payable as wages to workers at the time of termination.

Supreme Court Judge John Wright, writing for the court, said the Nebraska Wage Payment and Collection Act defined fringe benefits as a type of wage that includes vacation time. And the act, he said, demands employees receive unpaid wages.

“Upon termination of his or her employment, an employee is entitled to payment for any accrued vacation time that is provided for in the employment agreement,” the judge wrote.

But some observers say the act also defines sick leave as a fringe benefit. Does that mean employers must also pay departing workers for unused sick leave?

And what about employers that lump vacation time and sick leave in the same bag, sometimes called paid time off, or PTOs? Does Roseland spell the end of these policies?

What’s more, does the ruling outlaw “use it, or lose it” policies, which prevent workers from carrying unused vacation time from one year to the next?

“It (Roseland) has the effect of unintended consequences,” said Ron Sedlacek, an attorney and a lobbyist for the Nebraska Chamber of Commerce. “There are innovative (fringe benefit) plans that don’t really fit” with the ruling.

For example, he said, some employers have “wellness days” plans that allow employees to convert unused sick days into vacation time. Will Roseland require employers to pay out wellness days, too, Sedlacek asked.

“How does it affect other types of benefits, like sick leave?” he asked. “Maybe employers are going to say, ‘We need to revise our policies, be less flexible.’”

Many employers believed sick leave to be a conditional benefit, a view Sedlacek still seems to hold.

“You need to be sick to earn sick pay,” he said. “That’s a condition that has to be met.”

Others agreed.

The University of Nebraska does not pay departing employees for unused sick leave, and it sees nothing in the Roseland ruling that would require it to revise that policy, said University of Nebraska-Lincoln spokeswoman Kelly Bartling.

“Our legal department has the opinion that Roseland does not affect our sick leave policy,” she said. “You need to be sick to get sick leave. That would be our argument.”

At the time of Roseland, Bartling said, the university already was paying out unused vacation time to its employees upon termination.

However, the ruling’s logic — if it’s earned, it’s owed — has prompted one change in university policy.

In December, school officials announced the university would no longer require employees to use or lose earned vacation time by the end of a year. The new policy, which could be revised later, allows employees to carry vacation time over from one year to the next.

“Right now, the use-it-or-lose-it policy has been pulled,” said Bartling, who said the NU Board of Regents is expected to review the university’s leave policy in light of Roseland at its meeting Friday.

Don Taute, personnel director for the city of Lincoln and Lancaster County, said local government officials read Roseland as a narrow ruling on vacation policy.

Local government employees already receive pay-outs of 25 percent to 50 percent of unused sick leave when they quit, as well as pay-outs on all unused vacation time.

“We don’t really view it (Roseland) as having any effect,” Taute said.

Jim Graff, a human resources representative at State Farm, said the company would have to reconsider its sick leave policy if Roseland applied to the benefit.

Otherwise, he said, the ruling would have no effect on the company, which makes full payment on unused vacation time and allows employees to carry over as many as 60 vacation days from one year to the next.

Pigsley, the employment law attorney, said the Roseland court did not rule explicitly on sick leave. But if the ruling does apply to sick leave, he said, the ripple effect would be substantial.

Many employers, he said, allow their workers to “bank” some amount of unused sick leave for use in cases of long-term disability. But employers might jettison such policies if workers can cash in sick-leave banks when they quit, he said.

“If they (employers) have to pay out sick leave at termination, what employers want to offer in terms of sick leave could change,” he said.

“It could become like pension plans that had so much complicated paperwork that employers got out of it,” he continued. “That could happen with sick leave.”

Rich Nelson, labor law specialist at the state Department of Labor, said the department interprets Roseland as applying to sick leave and vacation time.

“The way it reads now, it does include sick leave,” he said. “It says wages include fringe benefits, and sick leave is a fringe benefit.”

In a possible sign of litigation to come, Nelson said, a few private-sector employees “have told us they’re going to go after their (unused) sick leave.”

He said Roseland also could affect year-to-year vacation carry-over policies.

The ruling did not affect state workers, whose leave policies are set out in specific state statutes, he said.

Omaha attorney Mary Hewitt, who represented Roseland and others in their suit against Strategic Management, doubted the ruling applied to sick leave or vacation carryover.

Roseland and three other former Strategic employees who had resigned sued Strategic when, in accordance with its company policy, it refused to pay them for unused vacation time.

A Douglas County District judge ruling in favor of the employees was later reversed by the Nebraska Court of Appeals. The Supreme Court’s ruling in October reversed the Court of Appeals decision.

“Sick leave is not deferred compensation,” Hewitt said. “It’s like jury duty or bereavement leave. Would anybody argue that that (jury duty or bereavement leave), if unused, should be paid out?”

She also said the Supreme Court did not decide one way or the other on whether caps on vacation carryover from year to year violated the law.

“It was discussed (at oral arguments) … but they recognized that it was a different issue,” she said.

Hewitt nevertheless acknowledged the ruling created some “gray areas,” which, she said, would likely be addressed by the Legislature rather than in a future court case.

Indeed, two bills were introduced last week.

One, by Sen. Kent Rogert of Tekamah, would allow employers and employees to agree that unused leave is not payable upon termination. The other, by Sen. Mike Friend of Omaha, would allow employers to determine the conditions in which fringe benefits are payable upon termination.

The desire for clarity in Roseland’s aftermath apparently is strong among employers, private and governmental, across Nebraska.

“There are a lot of interested parties statewide,” said Sedlacek, the state chamber lobbyist.

Gary Krumland of the Nebraska League of Municipalities agreed.

Roseland, he said, “will affect municipalities in the same way it affects other employers.

“It raises questions about the validity of vacation and sick leave policies.

“The court case and subsequent interpretations by various agencies and attorneys create uncertainly about what employers need to do, and there is a potential for some liability if employers are required to pay accumulated sick leave when employees are not sick.”

Reach Clarence Mabin at cmabin@journalstar.com or 473-7234.