Employment Law Questions? Ask an Employment Lawyer.
Yes that is legal because paid vacation is not a mandated benefit in yours or any other state. Essentially the employer could give you unpaid vacation or none at all. It is generally expected that vacation would be given at your normal hourly rate, but that is not mandated by any law.
It doesn't seem right. I'd agree. But there is nothing illegal about the pay practice. That's the correct answer to your question. Not sure what you want me to give you - an incorrect answer?
You may want to approach your employer and tell them you feel it is unfair of them to pay you less per hour while on vacation; perhaps they'll agree with your position.