It’s only natural for employees to think about taking a much-needed vacation. One question that most employees ask is, “Is my employer legally required to provide me with paid or unpaid vacation time?”
In California, employers are not legally required to provide their employees with paid or unpaid vacation time. However, if an employer establishes an agreement, policy or practice that says that they will provide paid vacation, then the employer is subject to certain restrictions in relation to how the employer fulfills their obligation for vacation pay.
Under California law:
- Vacation time counts as wages,
- Vacation pay accrues as it is earned, and
- Vacation pay cannot be forfeited, even if the employment is terminated.
In Boothby v. Atlas Mechanical, employers do have the right to place reasonable caps on vacation benefits which prevent employees from earning vacation that exceeds a certain number of hours.
Unless stipulated in a collective bargaining agreement, when the employee is terminated, all earned and unused vacation must be paid to the employee and at his or her final rate of pay. (Labor Code Section 227.3)
Is it legal for me to lose any unused balance?
If an employer’s vacation policy states that if an employee does not use all of their vacation entitlement by the end of the year, the employee loses the unused balance – this is not legal.
Under California law, vacation pay is a form of “wages,” thus any policy that says that an employee who does not use their vacation pay by a certain date forfeits their pay, is an illegal policy under state law, and will not be recognized by the Labor Commissioner.
However, if you don’t use your vacation by the end of the year, your employer does have the right to pay you for the vacation that you earned and accrued that year, but did not take.