Seventh Circuit Finds for Indiana Employer’s Vacation Buy-In Program, Clarifies CAFA Home-State Exception Remand Timing

Takeaways

• The Seventh Circuit found in Creason v. Elanco that an Indiana employer’s voluntary “vacation buy” program is a compensation agreement, not an unlawful wage assignment under Indiana wage law. 
• The court also held that the Class Action Fairness Act’s home-state exception is not automatic, and parties can waive the right to seek remand by waiting too long. 
• The court decision confirms that Indiana employers may enforce clearly stated vacation-forfeiture policies.

Related link

• Creason v. Elanco US Inc.

Article

The U.S. Court of Appeals for the Seventh Circuit affirmed a district court’s order that an employer’s “vacation buy” program was not a wage assignment under Indiana law, that the home-state exception of the Class Action Fairness Act (CAFA) is not absolute, and that the company did not have to pay out unused COVID-19 rollover vacation hours based on its policy. Creason v. Elanco US Inc., No. 25-1552 (7th Cir. June 29, 2026).

Background

Clayton Creason worked for Elanco from 2017 to 2021 and participated in Elanco’s voluntary “vacation buy” program. Under the program, employees could obtain a fourth week of paid vacation by agreeing to a reduced salary to cover the pay they would have received during the fourth vacation week. For Creason, the reduction was approximately $84 per week. He elected to participate in the program and took all available vacation, including the additional purchased vacation time.

After leaving Elanco, Creason sued under Indiana’s Wage Payment Statute, arguing that the weekly salary reduction was an unlawful wage assignment because Elanco did not comply with Indiana’s wage-assignment statute, which requires certain written disclosures and a right to rescind. He sought to represent a class of similarly situated employees.

He also claimed Elanco should have paid him for unused vacation hours that had been carried over from 2020 during the COVID-19 pandemic. Elanco’s policy 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. Creason left Elanco’s employment with only those rollover hours remaining.

The district court ruled against Creason, and he appealed.

Seventh Circuit Decision

The appellate court upheld the lower court’s decision.

A voluntary agreement to accept a lower salary in exchange for a benefit, such as additional vacation, differs from a deduction or assignment of wages, the court explained. The Seventh Circuit viewed the arrangement as a compensation bargain, not an assignment governed by Indiana’s wage-assignment statute. The court emphasized that Elanco did not withhold money from Creason’s paycheck and place it in a separate fund. Instead, his agreed salary was lowered. Tax treatment supported this conclusion because Creason was taxed only on the reduced salary amount.

As for the home-state exception, the Seventh Circuit confirmed that parties seeking remand under the CAFA’s home-state exception must act within a reasonable time. Even where the exception appears applicable, the court noted that waiting until substantial litigation has occurred in federal court can be fatal to the remand request.

Lastly, the Seventh Circuit highlighted it is long-standing Indiana law that payment for accrued vacation upon termination is not required. If an employer clearly states that certain vacation hours will expire or will not be paid out, that policy generally controls.

* * *

Indiana employers should ensure they regularly review and clearly communicate any vacation-forfeiture policies.

Please contact a Jackson Lewis attorney with any questions about workplace issues.