Vacation Pay and Paid-Time-Off (PTO) Laws in California
Cash Out Your Unused PTO or Vacation Days in California
An employer is not required to provide paid-time-off (PTO) under California vacation law. But many companies choose to offer vacation time as a job benefit.
If an employer offers PTO, California law mandates that employees get to keep their earned vacation days forever. Earned vacation days never expire in California, and employees are entitled to cash out any unused PTO when they leave the company.
Below we discuss 3 important things to know about California vacation pay law, and the 5 common methods employers use to try to take away vacation time.
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Common California Vacation Law Issues
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 vs Sick Leave
California employers are not required to give vacation time. Sick leave, however, is another matter. As of January 2024, California employers are generally mandated to provide at least 5 days (or 40 hours) of paid sick leave a year.
Common Ways California Employers Deny Vacation Time
(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, California law generally requires employers issue a final paycheck immediately upon termination. If an employee quits (AND has provided a 72-hour notice), California law requires employers to issue the final paycheck immediately as well. California employers have 72 hours to issue a final paycheck for employees who quit and do not give 72-hour notice.
In all of the above cases, final paychecks 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.
Linda has recovered millions of dollars prosecuting fraud, breach of contract, and breach of fiduciary cases against large banks and insurance companies.
Ashleigh Musser
Ashleigh represents consumers and employees in class actions and mass arbitration involving consumer protection and employment law.
Gibbs Mura is a California-based law firm committed to protecting the rights of clients nationwide who have been harmed by corporate misconduct. We represent individuals, whistleblowers, employees, and small businesses across the U.S. against the world’s largest corporations. Our award-winning lawyers have achieved landmark recoveries and billions of dollars for our clients in high-stakes class action and individual cases involving consumer protection, data breach, digital privacy, and federal and California employment lawsuits. Our attorneys have received numerous honors for their work, including “Top Plaintiff Lawyers in California,” “Top Class Action Attorneys Under 40,” “Consumer Protection MVP,” “Best Lawyers in America,” and “Top Cybersecurity/ Privacy Attorneys Under 40.”
