Labor & Employment Law Update

Indiana employers received favorable guidance from the U.S. Court of Appeals for the Seventh Circuit on two common workplace benefits issues: voluntary “vacation buy” programs and the treatment of unused rollover paid time off. In a June 2026 decision of first impression under Indiana law, Clayton Creason v. Elanco US Inc., the court held that an employee's election to accept reduced compensation in exchange for additional PTO is not an assignment of wages subject to state statutory requirements. The court also confirmed that employers may enforce clearly drafted policies providing that certain rollover vacation hours expire rather than being paid out at separation. The ruling confirms that properly structured vacation-buy programs are not automatically treated as wage assignments and underscores the value of unambiguous PTO policies.

Employee Challenges Elanco's Vacation Buy Program and PTO Policy

Clayton Creason, a former Elanco US employee, worked as an engineer for the company from November 2017 to November 2021. Like many companies, Elanco offered employees a standard paid vacation benefit along with an optional vacation buy program under which eligible employees could obtain an additional week of paid leave by agreeing to a corresponding reduction in salary. Creason opted into the vacation buy program, effectively reducing his weekly pay by roughly $84 in exchange for a fourth week of vacation. Creason routinely used the additional time off throughout his employment.

After resigning in November 2021, Creason filed suit against Elanco in Indiana state court, arguing that the vacation buy program was really a wage assignment in disguise. Under the Indiana Wage Payment Statute, an assignment of wages requires a written agreement with disclosed terms and a right of rescission. Because Elanco’s program did not include those formalities, Creason argued the deductions were unlawful and sought to recover the withheld amounts, on behalf of himself and a proposed class of similarly situated employees.

He also raised a second claim: that Elanco owed him a cash payout for unused, pandemic-era vacation hours that had rolled over from 2020.

Seventh Circuit Finds Vacation Buy Program Was a Compensation Arrangement, Not a Wage Assignment

For employers offering elective benefits tied to compensation, a key question before the court was whether Elanco’s program constituted an “assignment of wages” under Indiana law or simply a compensation arrangement.

The Seventh Circuit decision drew a sharp distinction between the two. The court explained that Indiana’s statute generally addresses situations where wages are deducted from an employee’s pay and routed somewhere else, such as being withheld, escrowed, or sent to a third party. In this case, however, Creason simply agreed to accept a lower weekly wage in exchange for more vacation time, working 48 weeks a year instead of 49 for less pay, and Elanco never directed any withheld monies to a third party or separate account.

As a result, the court held the vacation-buy program was a compensation arrangement rather than an assignment of wages, rendering Indiana's wage-assignment statute inapplicable. The court therefore rejected Creason's claim.

Seventh Circuit Upholds Use-It-or-Lose-It PTO Policy

By way of its opinion, the court also rejected Creason’s claim that Elanco was required to pay him for unused vacation hours that had carried over during the pandemic.

Elanco’s pandemic-era policy allowed that rollover but was explicit that the hours would simply expire if not used and would not be paid out in cash. Creason left employment with only those rollover hours remaining and argued he was owed their cash value. The court disagreed. Nothing in Indiana wage law required a cash payout of rollover vacation hours when the employer’s own written policy stated upfront that they would expire rather than convert to pay.

Because Elanco’s rollover policy was clear and unambiguous, the Court found no violation and held the hours were a use-it-or-lose-it benefit, not wages being improperly withheld.

Key Takeaways for Indiana Employers

The Creason holdings provide Indiana employers with useful guidance for structuring voluntary vacation-related benefits. The Seventh Circuit’s decision makes clear that a compensation arrangement under which an employee accepts a lower salary in exchange for additional paid time off is not necessarily a wage assignment merely because it results in lower periodic pay. The decision also underscores the importance of clear written policies governing vacation benefits, particularly whether unused or rollover vacation time will be paid out upon separation.

Employers offering vacation-buy or similar programs should clearly document how the arrangement affects compensation, while vacation policies should expressly address the treatment of unused time on an annual basis and at termination. As Creason demonstrates, the language and structure of those arrangements can be critical when determining whether an employer has additional obligations under Indiana wage law.