Vacation Pay for Salaried Employees in California: Rights, Accrual Rules, and Payout Requirements

Find out how California salaried employees accrue vacation pay, keep unused PTO, and claim payout when employment ends. See common employer tactics limiting vacation benefits, plus FAQs on sick leave, caps, holiday pay, and final paycheck rights.

By Brad Nakase, Attorney

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Have a quick question? We answered nearly 2000 FAQs.

Table of Contents

1. Introduction

2. California Vacation Law: Important Points

3. Typical Ways California Companies Refuse Vacation Time

4. FAQs

Introduction

Employers in California are not required to provide paid time off. However, a lot of businesses decide to provide vacation time as a perk.

According to California law, employees are entitled to maintain their accrued vacation days indefinitely if their employer gives paid time off. In California, employees have the right to cash out any remaining paid time off (PTO) upon leaving the employer.

Three key points of vacation pay for salaried Employees in California are covered below, along with five typical strategies used by companies to try to deny employees vacation time.

California Vacation Law: Important Points

1. Vacation days in California are perpetual: Employers in California are required to let their workers bank their unused paid time off days so they can save them to use later. Whether a worker earned vacation time recently or a year ago, the employer must honor it. In California, “use-it-or-lose-it” vacation rules are prohibited.

2. Quit or dismissed with Unused PTO: According to California labor law, vacation pay for salaried Employees in California is equal to earned wages. An employee is entitled to cash out any unused vacation time when they resign or are dismissed. Employers must reimburse workers for any earned paid time off at their normal rate.

3. Compulsory Vacation Time vs. Sick Leave: Vacation time isn’t mandatory in California. But sick leave is something else. As of January 2024, employers in California are required to offer a minimum of five days (or forty hours) of paid time off for illness per year.

Typical Ways California Companies Refuse Vacation Time

Specific Vacation Time practices: California law does not impose many restrictions on employers’ PTO practices, but it does require them to allow employees to bank unused vacation days. Employers may, for instance, mandate that workers give many weeks’ notice before claiming a vacation day.
No PTO Payment with Final payout: California law often mandates that businesses provide a final payout to fired employees right away. According to California law, businesses must also promptly issue the last paycheck if a staff member quits (provided that the employee has given 72 hours’ notice). If an employee quits without giving 72 hours’ notice, California companies have a full 72 hours to send a final paycheck.

Final paychecks must cover all leftover vacation days in each of the mentioned situations. For every day of unused paid time off, employees ought to receive a full day’s compensation (or a salary comparable).

Removing Vacation Days: According to California labor laws, an employer cannot deny you vacation pay for salaried Employees in California as a form of punishment. A vacation day is considered equal to one day’s salary after it is earned. However, partial-day absenteeism may be deducted from vacation time by employers. For instance, an employer can usually use an employee’s additional four hours for meals as half of a vacation day.
Independent contractors: Companies frequently attempt to misclassify employees as independent contractors so as to avoid providing them with the safeguards of California labor law. However, misclassifying employees as independent contractors with the goal of denying them the rights of employees is punishable by severe fines in California. Because your employer has the authority to set your hours, it would seem that you should be an employee if you are a self-employed worker and your agreement with the company provides paid time off.
Vacation Day Limits: In California, employers are permitted to set a cap on the number of vacation days that employees may earn. Employers who choose to offer vacation benefits can impose a limit on the number of vacation days you can earn.

FAQs

1. Pain/unpaid vacations: What are my rights?

Employers aren’t required to offer paid/unpaid vacation time. Some companies’ policies provide them as a perk. This is according to the promise of your employer to provide you with paid time off or your belonging to the vacation pay program. Regardless of how the contract is written or communicated to you, your company is required to adhere to a number of vacation regulations.

Public Employees: The majority of the guidelines in this document do not apply if you are employed by a local or state organization, since your employer’s policies are not governed by the same regulations as those of private companies.

Members of the Union: Employees in unions are exempt from the California statute that stipulates that any earned but underutilized vacation must be compensated when an employee departs. The guidelines listed below will not apply if your collective bargaining agreement (“CBA”) has regulations on vacation pay for salaried Employees in California. The union grievance process is often required for union members whose claims are covered by the CBA. Contact your union liaison in case you are a member of the union and have questions regarding vacation time.

2. I worked on a holiday: Will I be paid more?

The state law does not mandate that your employer has to pay you more when you work on a holiday, or on a day off on holidays (Thanksgiving or the Fourth of July). However, your employer is obligated to compensate you for any supplementary compensation (like double time) in case you are working during a holiday. Holidays are just like any other day unless your employer promises to pay you more. You only get extra if covering the holiday requires you to put in more than 8 hours a day or 40 hours a week.

3. How can I “earn” time off?

The vacation time is regarded as earnings under California law. The majority of vacation plans stipulate that your vacation time “accumulates” in proportion to the length of time you have been employed by your employer. For instance, you will have gained (accrued) five days of vacation following six months of work if you receive two weeks (ten work days) of vacation per year (or 0.42 days each period of pay if you get compensated twice a month).

You are earning a portion of your two-week vacation every pay period you work. It doesn’t matter if the company says you can’t take it until the end of the year. You get compensated for the vacation days you gained but didn’t use.

4. Is it possible for my firm to have distinct vacation plans for various employee types?

In general, yes. Different holiday and/or medical leave policies for various employee groups are typically allowed by your employer. For instance, an employer may grant non-exempt staff members two weeks of paid vacation time and exempt employees a period of three weeks. Employers occasionally have policies that state that you cannot accrue vacation time while on probation; therefore, if you are a probationary or temporary employee, you may not be entitled to vacation benefits.

A probationary period may be thirty days, sixty days, or even a whole year. On the other hand, you really start accruing vacation time on the initial day of the probationary term if the company has a personnel rule stating that you’re on probation and a vacation program that grants you “credit” for time spent on probation.

5. Will my company provide information about my eligibility to take a vacation?

Yes. Your company can tell you what days and how long you can take vacations. The reason that you are entitled to the vacation time does not mean you have the freedom to utilize it when you wish to. Your company has to negotiate your vacation schedule or follow the company rules on vacation time requests. Generally, it would be advisable to ask your employer to give you a copy of the request, as well as to assure you of the same in writing.

6. In case I do not spend my vacation time, will it be wasted?

No, most of the time. If you fail to utilize your accrued vacation time within the allotted time, the company cannot make you give it up. This implies that your employer cannot set a rule stating that you will forfeit your vacation pay for salaried Employees in California if it isn’t used by the end of the year. It also implies that you still have vacation time in a “bank” that you can utilize at another date if your request to take a holiday is turned down or if you want to put it off.

However, how much vacation time you can accrue may be subject to a reasonable “limit” set by your employer. If you have accrued the maximum quantity of vacation time permitted by your company, you will not be able to accrue any more time until you have used some of it. (For instance, you cannot save over 175 vacation hours at a given point, even if you receive more than 175 hours, if your employer “limits” the sum of vacation time you may take to 175. You can make extra money later on if you utilize a portion of your vacation time, but only up to the limit of 175 hours.)

7. What happens to the vacation time I have accrued when I quit?

The employer has to reimburse you for the days of leave that you did not use. Your eventual rate of pay is applied to those vacation days. Your employer is required to include the funds that you get for wasted vacation time in your final check, since it is considered pay.

You may be entitled to file an appeal with the Division of Labor Standards Enforcement/ Department of Industrial Relations(“Labor Commissioner”) to obtain your vacation pay for salaried Employees in California if the company does not include it in your last check, just as you would with any additional wages that your employer neglects to pay. Additionally, your company can be compelled to give you a penalty.

8. What happens if I leave my job after the vacation time advance given to me by my employer?

Some businesses allow their employees to use up more vacation time than they have accrued. The California Labor Commissioner adopted the stance that your employer can’t subtract the advance from your last paycheck if your employer provides you with an advance on vacation time and you quit your position before you can accrue the time.

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Vacation Pay for Salaried Employees in California: Rights, Accrual Rules, and Payout Requirements

Introduction

California Vacation Law: Important Points

Typical Ways California Companies Refuse Vacation Time

FAQs

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