Vacation pay is earned at a % of total pay or as a fixed time allotment, say 2 weeks. If an employee is paid at a tuxedo time allotment, the payment should be an average of their pay as if they had worked that period, say 2 weeks. If your employees regularly work overtime, then it could be said that there average work period is greater than 40 hours and so they should be paid out at that average of hours. This has been tested by the courts multiple times and the courts have always sided with the employee that regularly works overtime. In this case, your supervisor is correct, if, and only if, the overtime is a recurring and regular part of employment.
