Many California employers use a standard vacation policy in their employer handbook and give it nothing more than a cursory glance before making it official. However, doing this could land you in hot water.

California’s vacation policy rules are very different than other states. So if you grabbed a sample online, it will likely not be compliant with California’s employment laws. More importantly, California’s employment laws change every year. It is important to review your policies at least once a year to ensure that they are compliant with new laws.

The Pleasanton employment attorneys at Garcia & Gurney, ALC can help you review your vacation policy and any other policies to ensure that they are compliant with state regulations. Additionally, we can help you draft new policies and contracts that are more in line with your business goals and values.

Five Things to Look Out for When Reviewing Your California Vacation Policy

1. “Use-It-or-Lose-It” is Not Permitted.

In California, vacation time is treated as another form of wages. It is earned proportionately as the employee works and thus “vests” as it is earned. Once vacation time is earned, it cannot be forfeited. As such, any policy that requires an employee to use their vacation time by a specific date is an illegal policy and will be unenforceable in California.

2. “Accrual Caps” are Permitted.

Unlike use-it-or-lose-it policies that force an employee to forfeit their unused earned vacation, vacation policies that impose an accrual cap are permissible if properly drafted.

A vacation accrual cap only places a limit on how much vacation time an employee can earn before using what he or she has accrued. Essentially, once a certain amount of accrued vacation is earned, but not taken, then no further vacation can accrue until that balance falls below such cap.

Employers must be very careful when creating an accrual cap vacation policy. If the accrual and time periods involved are drafted in a way that operates like a use-it-or-lose-it policy, the policy will similarly be found illegal and unenforceable in California.

3. Payout upon Termination of Employment

Because vacation time is treated as a form of earned wages, if an employee quits or is terminated, he or she must be paid all wages, including vacation pay, immediately upon discharge (California Labor Code Sections 201 and 227.3).

Employees that are terminated or resign during their introductory period should be paid out their accrued, but unused, vacation time, even if the policy prohibited the employee from using such vacation time during the introductory period. Once accrued, the vacation time belongs to the employee.

4. California Employers Cannot Recover Debts for Vacation Time Not Accrued.

If an employer allows an employee to use vacation time prior to having earned it, and then that employee either quits or is discharged, the California employer is not able to withhold any of the individual’s final pay in order to recover money for that unearned vacation time.

5. Compliance with California Sick Leave Law 

A vacation policy, by itself, does not meet the requirements of California’s new paid sick leave law. Employers with just a vacation policy must also develop a sick leave policy. Employers with a paid time off (‘PTO”) policy may provide sick leave through its existing PTO policy provided such PTO policy satisfies the accrual, carryover, and use requirements of the new sick leave law. PTO policies differ from vacation policies because PTO policies provide time off for any reason as oppose to vacation policies that only offer time off for vacation.

Consult Your Pleasanton Business Attorneys 

At Garcia & Gurney, ALC, our Pleasanton employment lawyers possess a deep understanding of California’s labor laws and can help you ensure that your policies and contracts are in compliance with every single one of them. Whether you want to revisit your existing vacation policy or draft a new one entirely, our attorneys are happy to help. Contact our Pleasanton employment law firm at 925-468-0400.