Background
Clayton Creason worked as an engineer for Elanco US from November 2017 to November 2021. Elanco offered employees with fewer than four years’ service three weeks of paid vacation annually, plus an optional “vacation buy” program. Participating employees agreed to reduce their weekly salary by approximately $84 in exchange for a fourth week of paid leave. Creason participated in this program throughout his employment, voluntarily accepting the lower weekly pay.
Upon quitting in November 2021, Creason sued under the Indiana Wage Payment Statute, claiming Elanco had wrongfully withheld $84 per week. He contended that the vacation buy program constituted an “assignment of wages” requiring a formal written agreement with notice of rescission rights. The case was removed to federal court under the Class Action Fairness Act (CAFA) as a class action. The district court denied Creason’s motion to remand and granted summary judgment in favor of Elanco on all claims.
The Court’s Holding
The Seventh Circuit affirmed the district court on multiple grounds. First, regarding jurisdiction: although the case technically fell within CAFA’s home-state exception (over two-thirds of the putative class members were Indiana residents, the defendant was an Indiana citizen with its principal place of business there, and principal injuries occurred in Indiana), Creason had unreasonably delayed seeking remand. He received data showing the home-state exception applied 171 days before filing his motion to remand, and did not file until 348 days after removal. The district court properly denied remand because substantial progress toward resolving the merits had already occurred in federal court.
On the merits, the court held that the vacation buy program did not constitute a wage “assignment” under Indiana law. The statute contemplates assignments as diversions of earned wages to third parties or dedicated accounts. Here, Creason simply agreed to accept a lower base weekly salary—working 48 weeks annually for reduced pay rather than 49 weeks at full pay. No funds were deducted and set aside; Elanco simply paid the agreed-upon lower amount. Creason’s tax returns confirmed he was not taxed on the disputed $84 per week, proving he had taken a true salary reduction, not an assignment of wages. The court rejected Creason’s argument for broad statutory interpretation, finding the vacation buy arrangement fell outside the statute’s scope entirely.
Regarding unused COVID-19 rollover vacation hours remaining at separation: the court affirmed that Elanco’s policy—under which such hours did not carry forward beyond 2021 and were not paid out if unused—was valid under Indiana law, which does not require vacation payouts absent an employer promise.
Key Takeaways
- A voluntary salary reduction in exchange for additional paid time off is not a wage “assignment” under Indiana law and does not trigger the protective procedures required for true wage assignments.
- CAFA’s home-state exception has no strict deadline, but unreasonable delay in seeking remand may result in denial if the case has already substantially progressed on the merits.
- Employers are not required to pay out unused vacation time unless they have contractually promised to do so.
- Courts must address class certification before resolving merits; dismissing certification as “moot” after judgment is procedurally improper, though an unmeritorious class claim may properly be rejected on substance.
Why It Matters
This decision protects common vacation “buy” arrangements where employees voluntarily reduce salary to purchase additional time off. The court’s analysis—distinguishing between a wage assignment (redirection of earned compensation) and a salary negotiation (agreement to work fewer weeks for lower annual pay)—clarifies employer exposure under state wage statutes. Employers offering flexible vacation programs now have clear precedent that such programs do not trigger Indiana’s formal assignment requirements when structured as true salary reductions rather than payroll deductions placed in escrow or paid to third parties.
For plaintiffs’ attorneys, the decision reaffirms that CAFA’s home-state exception exists but is not self-executing; courts retain discretion to deny remand motions filed after unreasonable delays and substantial progress on the merits. The decision also reinforces that class representative standing requires genuine interest in the class’s welfare—a poor representative cannot recover for the class merely by recovering individually.