Legal Care for
Vacation Pay Issues

Vacation policies are determined by individual companies, and they may give vacation time off to some employees but not others.  In making the decision about who gets vacation days, they are not allowed to use race, religion or disability in the determination.

A company can require that an employee work a certain length of time before being eligible for vacation pay, and they can also cap the number of days or hours accrued.  An employer can put restrictions on when vacations may be taken, denying time off during a busy season. Even with the general freedom employers enjoy in establishing their vacation policies, an employee who has unused vacation days when their employment ends, either by termination or by resignation, has the right under California law to be compensated for unused time.

California law provides that accrued vacation time or PTO belongs to the employee. Employees may either use their vacation time during their employment or cash out the value of those hour at the time of their separations. When an employee quits or is fired or laid off, all accrued, unused vacation time must be included in the employee’s final paycheck.

According to California law, PTO and vacation are wages that have been earned by, but not yet paid to, the employee. Once you earn vacation or PTO, it cannot be taken away. This means “use it or lose it” policies, in which employees must use vacation by a certain date or forfeit it, are illegal in California.

Sick Pay

Sick pay is not considered vacation time and therefore not subject to these rules. If an employer has a stand-alone sick leave policy, sick pay does not need to be paid out upon separation from the company. However, if your employer lumps both sick and vacation time together into PTO, then all of the PTO time is treated like vacation time.