< Library - Employment Law                                                                      
Employee Rights

A:  There is no legal requirement in California that an employer provide its employees with either paid or unpaid vacation time. However, if an employer does have an established policy, practice, or agreement to provide paid vacation, then certain restrictions are placed on the employer as to how it fulfills its obligation to provide vacation pay.

     Under California law, earned vacation time is considered wages. Vacation time vests when labor is performed. (Vesting means that vacation time is earned and the employee is invested or endowed with rights in the wages). For example, if an employee is entitled to two weeks (10 work days) of vacation per year, after six months of work he or she will have earned five days of vacation.

     The employer has the right to manage its vacation pay responsibilities in the following ways:

     An employer may exclude certain employees from the vacation policy. If an employer's vacation policy excludes certain classes of employees, such as part-time, temporary, casual, or probationary, such provision is valid. To avoid any misunderstanding in this area, the vacation policy should state clearly which kinds of employees are excluded.

     An employer may reasonably cap vacation benefits accrued by the employee. A "cap" or “ceiling” limits the amount of vacation that can accrue (add up) to an employee in a given period. This means that once a certain amount of accrued vacation is earned but not taken, no further vacation or vacation pay accrues until the balance falls below the cap.

     An employer may decide when and how long the employee may take a vacation. An employer may control when vacation can be taken and the amount of vacation that may be taken at any particular time. The time periods involved for taking vacation must be reasonable. The Division of Labor and Standards Enforcement (DLSE), however, has repeatedly found vacation policies which provide that all vacation must be taken in the year it is earned (or in a very limited period following the accrual period) are unfair and will not be enforced.

     An employer may pay off the employee for vacation that had accrued during the year. Instead of carrying over vacation time from last year into the current year, some employers choose to pay off any vacation time accrued for the year instead of having the time carried on to the current year.

“Use It or Lose It” Provision

     Some employees are told that if they do not use their vacation time, they lose it. This “use it or lose it” provision is not legal in California. Since vacation pay is another form of wages which vests as it is earned, a policy that provides for the forfeiture of vacation pay that is not used by a specified date is an illegal policy.

When Employment Terminates

     Vacation pay accrues as it is earned, and cannot be forfeited, even upon termination of employment. Under California law, unless otherwise stipulated by a collective bargaining agreement, whenever the employment relationship ends for whatever reason, and the employee has not used all earned and accrued vacation, the employer must pay the employee at his or her final rate of pay for all earned and accrued and unused vacation days. Because paid vacation benefits are considered wages, such pay must be included in the employee's final paycheck.

© Law Offices C. Joe Sayas, Jr.