Don't Mess with My Vacation! California Vacation Day Law
After an employee’s salary and employer-paid health insurance, there is probably no employment perk more coveted than vacation days. An employee’s decision to apply for employment often rests on the generosity of the employer’s vacation day policy and how frequently the employee will be paid to not work at all. This article provides an overview of California’s laws and regulations for paid time off.
What is Paid Time Off?
Paid time off is commonly referred to as “PTO” or “Vacation Pay”. Legally, PTO is treated as a form of a wage; in other words, it is a benefit that belongs to the employee once it is earned. There is no California requirement that employers provide their employees with any PTO or other form of paid vacation. This is in contrast to California paid sick leave, which must be offered to all California employees. Unlike other forms of leave, paid time off is not a form of “protected leave”, meaning the employer does not have to guarantee the employee reinstatement to their position upon their return from vacation.
Because offering paid time off is purely voluntary, an employer may legally choose to offer a certain amount of paid time off to some employees, and less to others. For instance, an employer may offer better vacation benefits based on seniority to encourage employee retention.
Which Laws Apply to Vacation Pay?
Even though the decision to offer any paid time off is voluntary, employers who choose to offer paid time off to their employees are subject to certain California laws related to the accrual and payout of vacation pay
First, paid time off that has been earned (called “vested and accrued” paid time off) is considered a form of wage or property that belongs to the employee. Just like regular money wages, any vested and accrued paid time off must be paid out upon the employee’s termination of employment. That payment must occur immediately if the termination was involuntary (i.e., a firing) and the payout must occur within 72 hours if the termination was voluntary (i.e., a resignation) (Cal. Lab. Code §§ 201-203). In contrast, unused sick time is not paid out upon the termination of employment.
Second, employers are strictly prohibited from maintaining a “use it or lose it policy” with regard to their employee’s PTO. This means that an employer cannot simply take away an employee’s PTO if it remains unused by a certain deadline. This situation frequently arises with employers who maintain a policy that prohibits the employee from transferring his or her PTO from one year of employment to the next. Any other policy that causes an employee to forfeit his or her vested and accrued paid time off violates California law.
Third, even though employers cannot revoke paid time off that has already been earned by the employee, employers are legally allowed to place a preemptive cap on the total number of vacation hours that may be earned by the employee. For instance, it is lawful for employers to maintain a vacation policy that permits employees to earn a maximum of 80 vacation hours per year. Similarly, as long as employers do not take away paid time off that has already been earned, employers may modify existing vacation policies.
Fourth, some employers offer a sick day/vacation day hybrid, sometimes called “personal days” or “floating holidays”, which may be used for both medical purposes and for the purpose of vacation. Hybrid personal days are treated as paid time off under California law and therefore must be paid out upon the termination of employment. Similarly, these hybrid personal days must offer the same or greater level of protection as regular sick-days.
Lastly, although employees have a clear legal right to eventually get paid the monetary value of their vested and accrued paid time off, employers are in the driver’s seat when it comes to allowing employees to actually use their paid time off. Generally speaking, an employer may decide when an employee may schedule their vacation, how many work days the employee may miss, and otherwise control the terms under which vacation time may be used by employees, even if the employee has available paid time off (Rhea v. General Atomics (2014) 227 Cal.App.4th 1560, 1572-1573).
What are an Employee’s Rights Related to PTO?
Employers who do not pay their former employees in a timely manner the full value of the employee’s remaining vacation pay face a legal claim for unpaid wages and associated penalties. Employees may also recover a “wait-time” penalty for any late or unpaid vacation hours (Labor Code §§ 201-203). The wait-time penalty is equal to a full-day’s wages, up to 30 days, in the case that the employee’s vested and accrued vacation pay goes unpaid by the employer (Id.) Employee’s may also recover their attorney fees in a lawsuit for unpaid vacation hours.
Do you have a question about your own vacation pay? Contact the Law Office of Brian Mathias.