California Vacation Laws Explained

Vacations are a critical part of maintaining that all-important work-life balance. Employers are wise to recognize the role vacation days can play in preventing employee burnout and maintaining productivity. However, there is no specific law in California requiring employers to grant any vacation time – paid or unpaid – to their workers. That said, California law does dictate certain aspects of vacation time when it is offered, and employers with vacation policies are not entirely free to draft them according to their will.

Read on to learn what California laws have to say about vacation time in the Golden State. If you are a Bay Area employer needing help understanding California vacation laws and company policies, or if you feel your rights as an employee have been violated, call Bay Area employment lawyer Richard Koss in San Francisco or the East Bay to discuss your needs and concerns.

Accrual of Vacation Time in California

In California, there’s no law that requires employers to provide vacation time to their employees, either paid or unpaid. However, if an employer does decide to offer vacation days as an employment benefit, specific laws kick in that govern how vacation time is accrued and disbursed.

“Use It or Lose It” Policies Are Not Allowed

California law does not allow “use it or lose it” policies. Employers cannot implement a policy where accrued vacation time expires after a set period. This is because in California, vacation days are considered to be a form of wages, so once they are earned, they can’t be “unearned.” Also, since they are considered to be wages, vacation days are earned as work is performed. In other words, an employee entitled to two weeks of vacation per year will have earned one week of vacation after working for six months.

Accrual Caps Are Allowed

While employers cannot take away accrued vacation days, they can implement a cap on how much vacation time an employee can accrue. Once an employee reaches this cap, they will not accumulate any more vacation days until they use some of their existing days. The time allotted in the policy for taking vacation must be reasonable and cannot be merely a subterfuge to deny employees access to their vacation benefits.

A valid vacation policy could also dictate that unused vacation days at the end of the year are paid as wages rather than rolling over to the next year as vacation days.

Utilization of Vacation Days

Once you’ve accrued vacation days, the next consideration is how to use them. The use of vacation days is generally at the discretion of the employer, subject to some considerations.

Fair Policy

Employers must maintain a fair and consistent method for granting vacation time to all employees. Discriminatory practices based on race, gender, age, or any other protected characteristic are unlawful and can expose the employer to a discrimination charge with the EEOC or California Civil Rights Dept., or a private civil lawsuit from the worker. Vacation policies can differentiate among other classes of workers, however, such as excluding part-time or probationary employees from earning vacation time.

Advance Notice

Most companies require employees to give advance notice, usually in writing, to take a vacation. The notice period varies by company but aims to provide the employer with sufficient time to cover the employee’s duties during their absence. A policy requiring reasonable notice will be upheld as valid. The employer’s vacation policy can also regulate when vacation can or must be used and limit how much vacation can be taken at a time.

Payout of Vacation Time on Separation From Employment

Remember, in California, earned but unused vacation days are considered a form of wages. This means that any accrued vacation time (but not sick time) must be paid out when an employee leaves the company, regardless of whether they resign, quit or are terminated for cause. Note that collective bargaining agreements might stipulate otherwise; if so, the terms of the CBA would control.

Final Paycheck

Upon termination or resignation, all accrued vacation days must be included in the employee’s final paycheck. Failure to do so can lead to a wage claim from the employee and wage penalties for the employer.

Calculating Payout

The payout for unused vacation days is calculated based on the employee’s final rate of pay. This amount includes not just the hourly wage or salary, but also any other forms of compensation, such as bonuses or commissions.

Practical Legal Advice and Representation From a Skilled and Experienced Bay Area Employment Law Attorney

It’s critical for employers and employees alike to understand what California law has to say when it comes to vacation policies. If you are a San Francisco employee or employer in need of advice or representation concerning vacation pay or other California labor law issues, contact the Bay Area employment law attorney Richard Koss at 650-722-7046 on the San Francisco Peninsula, or 925-757-1700 in the East Bay.