Legal Question in Employment Law in California
California Vacation Pay out upon Anniversary
Our nationwide company has always had a "use it or lose it" vacation policy. California employees have always been paid out any remaining vacation time upon hitting their anniversary.
We recently went to a vacation policy that allows an employee to carry over 50 % of their vacation time upon hitting their anniversary. What are the laws governing California employees? Do we carry over 50 % and payout the remainder unused portion, pay out all unused vacation and not carry over anything or allow the employee to carry over up to 50% and pay out the remaining balance(for example if the employee wanted to carry over only 25% and be paid out the rest)?
Do we offer one of the above options or must we offer a choice to the employee?
2 Answers from Attorneys
Re: California Vacation Pay out upon Anniversary
California employers are required to pay all accrued vacation at the time of the employee's termination of employment. An employer may establish a policy to cap or otherwise limit accrued vacation, but may not establish a policy which results in an employee's loss of accrued vacation, a "use it or lose it policy". Such a policy is prohibited by Labor Code section 227.3, as such policy would require the employee to forfeit their accrued vacation.
Re: California Vacation Pay out upon Anniversary
You cannot have a use it or lose it. You can allow any carryover you want to but the rest must be paid out. You may also stop the accumulation of vacation time if a certain amount is reached and not used.
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