Legal Question in Employment Law in California

It may or may not be legal. If you are a salaried exempt employee, then it is totally illegal. Exempt employees must be paid in units of not less than one day, even if the time is recorded in hours. So to charge vacation time for being late on a day that you did in fact show up for work would be illegal. If you are an hourly non-exempt employee, then it is only legal if they paid you for the time you weren't actually there and then charged it to vacation time. Vacation pay is vested when earned. So it is illegal to just take it away as a penalty or for any other reason. It is not illegal, however, to pay you for time you are absent during regularly scheduled hours and charge it to your vacation bank.

I would need more facts to be able to answer this opinion.

The issue turns on a number of things. It depends on whether or not the vacation time was "accrued," meaning you had already earned it. It depends on what you mean by "took away" your time. If they essentially paid out an amount of vacation time to cover the period you were late, for example, then that may be legal. It depends on whether the "policy" you refer to constitutes the exclusive list of terms of your employment as to discipline for being late. It depends on whether this discipline is a form of unlawful discrimination. There may be other factors I have not thought of.

If the amount of vacation time in dispute is significant enough to pursue, then your remedy for recovery would lie either with the California Labor Commissioner or in small claims court. I cannot tell you if you have a reasonable chance of success on that issue, given all the questions above.