The U.S. Court of Appeals for the Seventh Circuit has upheld an Indiana employer’s voluntary vacation purchase programme, ruling it does not constitute an unlawful wage assignment.
The case, Creason v. Elanco US Inc., No. 25-1552, was decided on June 29, 2026, and carries significant implications for employers operating under Indiana wage law.
Clayton Creason worked for Elanco from 2017 to 2021 and voluntarily participated in the company’s “vacation buy” programme during his employment.
Under the programme, employees could obtain a fourth week of paid vacation by agreeing to a reduced salary to cover the pay they would have received during that additional week.
For Creason, the weekly salary reduction amounted to approximately $84, and he elected to participate, taking all available vacation time including the additional purchased week.
After leaving Elanco, Creason filed suit under Indiana’s Wage Payment Statute, arguing the weekly salary reduction was an unlawful wage assignment that failed to meet statutory disclosure requirements.
He also sought to represent a class of similarly situated employees and claimed Elanco owed him payment for unused vacation hours carried over from 2020 during the COVID-19 pandemic.
Elanco’s policy had allowed certain vacation hours to roll into 2021 but expressly stated that unused rollover hours would not be paid out in cash and would expire if not used by year’s end.
The Seventh Circuit found that a voluntary agreement to accept a lower salary in exchange for a benefit such as additional vacation differs fundamentally from a deduction or wage assignment governed by statute.
The court characterised the arrangement as a compensation bargain, noting that Elanco did not withhold money from Creason’s paycheck and place it in a separate fund but instead agreed a lower salary from the outset.
Tax treatment further supported the court’s reasoning, as Creason was taxed only on the reduced salary amount rather than on any withheld portion of a higher wage.
On the COVID-19 rollover vacation hours, the Seventh Circuit affirmed longstanding Indiana law holding that payment for accrued vacation upon termination is not required when an employer has clearly stated such hours will expire.
The court found Elanco’s policy explicitly stated unused rollover hours would not be paid out, and that policy was determined to control the outcome of Creason’s claim.
The ruling also addressed an important procedural question under the Class Action Fairness Act, clarifying that the home-state exception to federal jurisdiction is not automatic and can be waived.
The Seventh Circuit confirmed that parties seeking remand under the CAFA home-state exception must act within a reasonable time, and that waiting until substantial litigation has occurred in federal court can be fatal to such a request.
Legal analysts note the decision confirms Indiana employers may enforce clearly stated vacation-forfeiture policies, provided those policies are communicated transparently to employees before participation in any related programme.
Employers across Indiana are being advised to regularly review and clearly communicate any vacation-forfeiture policies to reduce exposure to similar wage-payment claims in the future.