While vacation time is not limited to the summer months, this is the traditional time for employees to vacate the workplace and get a little R&R. With visions of sun-drenched beaches, waterparks and road trips fresh in our minds, here is a reminder of the basic California rules on vacation, or paid time off. The rules are complex, and are different in more significant ways than just about anywhere else in the country, so knock the water out of your ears and pay close attention.
Q. What’s the difference between vacation and PTO (paid time off)?
In California, there is no difference. Any paid time off that can be used at the employee’s discretion and is not tied to a particular event (like your birthday) is considered vacation. This includes unrestricted “personal days” and “floating holidays.” They’re all vacation.
Q. Can an employer implement a “use-it-or-lose-it” policy for vacations?
No. Unlike most everywhere else, California law does not permit employers to require forfeiture of vested vacation if employees do not take the vacation during a prescribed time period. For example, it is not okay in California to have a policy that says “You get two (2) weeks of vacation a year, but if you don’t use it by December 31, it will be lost.” Here in California, rather than being lost, the vacation balance rolls over in its entirety.
Q. But, can an employer cap the amount of vacation time an employee accrues?
Yes. In order to prevent vacation accruing ad infinitum, employers have two potential tools.
One: Have a vacation accrual cap in place. That is, when an employee accrues a maximum amount of vacation (say 1.5 times the annual accrual rate), all accruals will stop until the employee uses some vacation and the vacation balance falls below the cap. The employer’s policy on vacation accrual caps must be carefully drafted so that an employee has a reasonable time to use accrued vacation. Simply capping at the annual rate of accrual is not a reasonable amount.
Two: Have a policy that mandates when vacation must be used (see next week’s post on this).
Q. Does an employer have to pay out vacation when an employee terminates?
Yes. In California, accrued vacation is treated the same as wages. If an employee has accrued but unused vacation at the time employment ends, it must be paid out at the employee’s final rate of pay.
Q. Can an employer decide not to provide vacation pay to some employees, such as probationary, part-time or temporary employees?