California Vacation Law
The State of California does not require employers to offer employees unpaid or paid vacation time, states the Division of Labor Standards Enforcement. However, California law requires employers to comply with vacation terms they establish with employees. When an employer's policy offers vacation time to employees, paid or unpaid, California law considers the policy a contractual agreement. State law offers protections for both employers and employees regarding vacation time and pay.
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Labor Code Section 227.3
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California Labor Code Section 227.3 states that all earned vacation time must be paid to an employee when employment is terminated. The only exception to the law exists in cases when a collective bargaining agreement, such as a contract established between a company and a labor union, provides that payment of earned vacation time is not required when employment is terminated. Labor Code Section 227.3 falls under the jurisdiction of the Labor Commissioner of the State of California, who determines the fairness of issues relating to vacation time and pay.
Wages
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The California Labor Code considers time off for vacation as earned wages. If, under the contract of employment, the employ has performed the necessary duties required to earn vacation time, the vacation days are considered earned wages under the law. For example, if an employer offers 12 vacation days per year to employees, and an employee works for three months, the employee is due three days of vacation.
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Termination of Employment
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Upon termination of employment, California law requires employers to pay employees all earned vacation pay, at the final pay rate of the employee. An employer cannot demote or lower the rate of an employee's pay prior to termination, in order to pay a lower amount of vacation pay.
Vacation Caps
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An employer cannot require an employee to use vacation time, nor can employer take away earned vacation time from an employee. This means that an employer cannot legally implement a policy in which an employee must use all accrued vacation, with the threat of losing the paid time off. However, an employer can cap the amount of new vacation time an employee can accrue when vacation days are unused. For example, an employer can implement a policy that states employees can only accrue a maximum of two weeks of vacation, at which time the employee must take the time off before additional vacation days can accrue.
Paid Time Off
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California employers can call all time an employee takes off "paid time off" or "PTO." PTO can include paid sick days, vacation days or floating holidays, which employees can take off at a time they choose. Employers may choose any combination of PTO days to offer employees. However, the California Labor Code considers all accrued PTO days vacation days, and requires employers to pay the employee when employment is terminated.
Employer Rights to Control Time Off
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The State of California allows employers to control vacation time by implementing a policy of how many vacation days an employee may take off at one time, how many employees can take vacation at the same time and when employees can use accrued vacation days. This allows the employer to maintain an adequately staffed operation.
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