California Vacation Pay Law (2023)

California Vacation Days Never Expire: In California, it is mandatory that an employer allow its employees to bank their unused PTO days and save them for later. An employer is required to honor earned vacation time, whether the employee earned it yesterday or a year ago. Vacation policies that say “use-it-or-lose-it” are forbidden in California.

Quit or Fired with Unspent PTO: Earned vacation days are treated by California labor law as equivalent to earned wages. When an employee leaves their job, whether they quit or get fired, they have a right to cash out any unspent vacation hours. Employers are required to pay employees, at their regular rate, for all paid-time-off that the employee has accrued.

Mandatory Vacation Time: California employers are not required to give vacation time. Sick leave is another matter. California passed a law in 2015 mandating that employers provide at least 3 days of paid sick leave a year.

(1) Restrictive Vacation Time Policies: California law requires employers to let employees bank unspent vacation days, but it doesn’t place many other limits on employers’ PTO policies. For example, employers can require that employees give several weeks advance notice before taking a vacation day.

(2) No PTO Pay-Out with Final Paycheck: When an employee is terminated or quits, California law requires employers issue a final paycheck within 72 hours. This final paycheck must include a pay out for all unused vacation days. Employee’s should get a full day’s wages (or salary equivalent) for each day of unused PTO.

(3) Taking Away Vacation Days: Under California labor law, an employer cannot take away your vacation days as a punishment. Once you earn a vacation day, that day is treated as equivalent to a day’s worth of wages. Employers can, however, count partial-day absences against vacation time. For example, if an employee takes an extra four hours for lunch, an employer can typically count that as using half a vacation day.

Employers may dock your vacation pay if you take a long lunch
(4) Independent contractors: Employers often try to avoid giving workers the protections of California labor law by misclassifying them as independent contractors. But California imposes hefty penalties for misclassifying workers as independent contractors to avoid giving them the rights due to employees. If you’re an independent contractor and your contract with the company gives you paid-time-off, this fact makes it seem that you should be an employee because your employer has the right to control your hours.

(5) Caps on Vacation Days: Employers can legally cap how many vacation days you can accrue in California. Employers that choose to offer vacation benefits can cap the number of vacation days that you can bank at—for example—5 days, or 10 days.

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