(a) Definitions. In this section:
  (1) "Calendar month" means the first day through the last day of January, February, March, April, May, June, July, August, September, October, November, or December.
  (2) "Community college" has the meaning assigned to "public junior college."
  (3) "Comptroller" means the Comptroller of Public Accounts for the State of Texas.
  (4) "Fiscal year" means the accounting period beginning on September 1st and ending the following August 31st.
  (5) "Institution of higher education" has the meaning assigned by Education Code, §61.003, except that the term does not include a community college or a public junior college.
  (6) "National holiday" has the meaning assigned by Government Code, §661.061(1).
  (7) "Public junior college" has the meaning assigned by Education Code, §61.003.
  (8) "State agency" means a department, board, commission, committee, council, agency, office, or other entity in the executive, legislative, or judicial branch of Texas state government, the jurisdiction of which is not limited to a geographical portion of this state. The term includes the State Bar of Texas, the Board of Law Examiners, and an institution of higher education. The term does not include a community college or a public junior college.
  (9) "State employee" has the meaning assigned by Government Code, §661.061(2).
  (10) "State holiday" has the meaning assigned by Government Code, §661.061(3).
  (11) "Temporary state employee" means a state employee who is hired to provide services to a state agency for a limited time. The term includes a seasonal employee. The term does not include:
    (A) an independent contractor; or
    (B) an employee or independent contractor of an independent contractor.
  (12) "Workday" means any day except Saturday and Sunday. The term includes a state or national holiday.
(b) Meaning of "continuous state employment." For purposes of determining whether a state employee is entitled to be paid for the accrued balance of the employee's vacation time upon separation from state employment, the employee has "continuous state employment" so long as employment with the state is not interrupted by a period when the employee is not being paid a regular state salary. The period when the employee is on leave without pay or leave of absence without pay is not an interruption that requires the period of continuous state employment to begin again. A leave period that covers one or more entire calendar months, however, does not count toward fulfilling the six month requirement in Government Code, §661.062(a).
(c) Meaning of "separation from state employment." For purposes of determining whether a state employee is entitled to be paid for the accrued balance of the employee's vacation time, "separation from state employment" includes:
  (1) a resignation or dismissal from state employment;
  (2) a circumstance listed in Government Code, §661.062(b)(2) - (5) or §661.091(a); or
  (3) a state employee leaving one state agency to begin working for another state agency, if at least one workday occurs between the two employments.
(d) Responsibility for making the payment. The state agency that employed a state employee at the time of the employee's separation from state employment is responsible for paying the accrued balance of the employee's vacation time. This responsibility exists even if the employee at that time held a position that did not accrue vacation time.
(e) Hours of accrued vacation time to be paid.
  (1) Allocation of accrued time. Except as provided in paragraph (2)(D)(ii) of this subsection, the accrued balance of a state employee's vacation time must be allocated over the workdays following the effective time of the employee's separation from state employment until the balance is allocated completely.
    (A) If the employee, at the effective time of separation, was normally scheduled to work at least 40 hours each week, then each workday consists of eight hours.
    (B) If the employee, at the effective time of separation, was normally scheduled to work fewer than 40 hours each week, then each workday consists of 20% of the number of hours the employee was normally scheduled to work each week.
  (2) Addition for holidays encountered during the allocation.
    (A) This subparagraph applies to a state employee who, on the effective date of separation from state employment, was normally scheduled to work at least 40 hours each week. Except as provided in subparagraph (C) or (D)(i) of this paragraph, eight hours must be added to the accrued balance of the employee's vacation time for each state or national holiday that occurs during the period over which the balance is allocated.
    (B) This subparagraph applies to a state employee who, on the effective date of separation from state employment, was normally scheduled to work fewer than 40 hours each week. Except as provided in subparagraph (C) or (D)(i) of this paragraph, a specified number of hours must to be added to the accrued balance of the employee's vacation time for each state or national holiday that occurs during the period over which the balance is allocated. The number of hours added for each holiday is equal to the product of:
      (i) eight hours; and
      (ii) the percentage of 40 hours that the employee was normally scheduled to work each week on the effective date.
    (C) This subparagraph applies to a state employee who is entitled to receive a payment under this subsection because the employee moves or transfers to a position that does not accrue vacation time. No hours may be added to the accrued balance of the employee's vacation time for a state or national holiday that occurs during the period over which the balance is allocated.
    (D) This subparagraph applies to a state employee who is entitled to be paid for a state or national holiday that occurs after the effective time of the employee's separation from state employment.
      (i) No hours may be added to the accrued balance of the employee's vacation time for that holiday.
      (ii) The holiday is ignored when allocating the accrued balance of the employee's vacation time over the workdays following the effective time of the employee's separation from state employment.
  (3) Individuals not state employees during the allocation period. The inclusion of a workday in the allocation of the accrued balance of vacation time does not cause any individual to be a state employee on that workday for any purpose.
(f) Computation of the payment.
  (1) Accrued balances allocated over only one month. If the accrued balance of a state employee's vacation time is allocated over only one month, then the amount of the payment for that balance is equal to the product of:
    (A) the number of hours of the balance; and
    (B) the applicable rate of compensation of the employee, which must be expressed as an hourly rate for that month.
  (2) Accrued balances allocated over more than one month. If the accrued balance of a state employee's vacation time is allocated over more than one month, then the amount of the payment for that balance is equal to the sum of the amounts attributed to each month included in the allocation. The amount attributed to any particular month is equal to the product of:
    (A) the number of hours of the balance that is allocated to that month; and
    (B) the applicable rate of compensation of the employee, which must be expressed as an hourly rate for that month.
(g) Applicable rate of compensation.
  (1) Items included in the rate of compensation. For purposes of determining the amount of a payment under this section, a state employee's rate of compensation includes base pay plus any emolument or stipend provided as a salary supplement. A special item of compensation, e.g., housing, utilities, clothing, and cleaning, may be included in the rate only if the item was provided in lieu of base pay. Longevity pay, hazardous duty pay, and benefit replacement pay may not be included in the rate.
  (2) Employees who are not hourly. This paragraph applies only to a state employee who was not an hourly employee at the effective time of the employee's separation from state employment.
    (A) The employee's rate of compensation must be expressed as an hourly rate for each month or part of a month included in the allocation of the accrued balance of vacation time.
    (B) This subparagraph applies only if the state agency making a payment under this section is not an institution of higher education. The hourly rate of compensation for a particular month is equal to a quotient:
      (i) the numerator of which is equal to the rate of compensation for the month; and
Cont'd...