Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
Author: Scarinci Hollenbeck, LLC
Date: March 17, 2023
The Firm
201-896-4100 info@sh-law.comNew Jersey Court Holds that an Employee Terminated for Disciplinary Reasons not entitled to Payout of PTO
On February 22, 2023, the Superior Court of New Jersey Appellate Division ruled that a hospital employee discharged for disciplinary reasons was not entitled to payment of accrued paid time off (PTO) because the hospital had an express policy that PTO would not be paid out in such situations.
In HMH Hospitals Corp. v. Warren, the appellate court found that the employee was not entitled to payment for any PTO accrued prior to termination because accrued PTO does not constitute wages under New Jersey state law and did not have to be paid out unless as provided by an employer’s PTO policy. In this case, the employer’s PTO policy provided that an employee was not entitled to be paid for unused PTO upon termination unless the employee provided at least three weeks prior notice or when “employment is terminated in connection with a disciplinary action.”1 It is important to note that this policy was only in place a few months prior to the termination.
Ms. Warren, who was a certified nurse’s assistant, sought payment after her termination for admitted misconduct for PTO hours she accrued for the three years prior to her termination. After the request was denied, Warren filed a claim with the Wage Collection Section, Division of Wage and Hour Compliance, of the New Jersey Department of Labor and Workforce Development, which assigned the matter to a wage collection referee, who conducted a hearing.
At the conclusion of the hearing, the referee found that Warren was entitled to PTO at Warren’s rates of pay at the time the PTO was accrued, however, only until the date the new PTO policy prohibiting the payment of PTO for disciplinary terminations took effect. The hospital timely appealed the referee’s determination. The lower court ruled that the company policy denying payment for accrued PTO hours was void because it found that accrued PTO constituted wages under the New Jersey Wage Payment Law and that there was therefore an obligation to pay out PTO hours upon the employee’s discharge.
However, the appellate division overruled that decision. The appellate court held that the hospital’s “PTO policy set the terms for Warren’s entitlement to pay for accrued PTO hours, and, under the policy’s express terms, she was not entitled to compensation….” Specifically, the appellate court stated, “the accrued hours constituted a benefit entitling Warren to payment at a point in the future but not as ‘direct monetary compensation for labor or services rendered” and that the hospital was “not required to offer, pay, or provide PTO in the first instance.”
The decision by the New Jersey appellate court highlights the importance of using precise language in a PTO policy, especially when detailing whether employees are or are not entitled to payment for accrued time. The court placed emphasis on the wording of the hospital’s PTO policy indicating that the language concerning disciplinary discharge “set the terms” for when PTO would not be paid and thus. The court further noted that since accrued PTO does not constitute wages in New Jersey, employers are “to contract regarding a term of employment that does not violate the law.”
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

New Jersey businesses must manage legal and reputational risk together because modern disputes play out on two fronts at once: the legal proceeding itself and the court of public opinion, where customers, employees, investors, and business partners often reach conclusions long before a judge or jury has had the opportunity to evaluate the facts. Success […]
Author: Sean M. Pena

No. An eviction does not automatically end a tenant’s obligation to pay rent. Post-eviction rent claims are common because recovering possession resolves who has the right to occupy the premises, but it does not extinguish the tenant’s contractual obligations under the lease. Whether unpaid or future rent remains owed depends on three factors: the lease’s […]
Author: Donald M. Pepe

A company is dissolved; legally, it ceases to exist. Accordingly, dissolution results in significant legal and financial consequences. It is a process that must be properly managed to avoid continuing liability. The Corporate Dissolution Process Corporate dissolution is the legal process of formally closing a corporation, paying its debts and distributing the remaining assets. Most […]
Author: Jay McDaniel

A triple net lease is a commercial lease in which the tenant pays the property’s real estate taxes, insurance, and maintenance costs, known as the three nets, in addition to base rent. They are most often used in freestanding retail and office buildings and in large single-tenant industrial properties, with terms that typically run 10 […]
Author: Donald M. Pepe

Every lawsuit comes with a cost, and knowing when to settle a lawsuit is one of the most consequential decisions a business owner will face. Experienced litigators understand how to minimize cost and obtain certainty for their clients. For many business owners, the decision is viewed almost entirely through a financial lens: What will it cost […]
Author: Sean M. Pena

Business law services are legal services that help companies form, operate, transact, protect assets, manage risk, and resolve disputes. The phrase can sound broad because it is broad. A company may need help with entity formation one month, contract review the next, a commercial lease after that, and a business dispute later in the year. […]
Author: Scarinci Hollenbeck, LLC
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!