Paid Time Off California: Laws, Accrual, Vacation Pay, and Employee Rights

Get clear guidance on paid time off in California, including PTO laws, sick leave rules, accrual, and vacation payout obligations. See how California PTO rules affect vacation requests, paid sick leave, layoffs, FTE status, cash-outs, and employee rights.

By Douglas Wade, Attorney

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Have a quick question? We answered nearly 2000 FAQs.

Table of Contents

1. Introduction

2. PTO: What is it?

3. Vacation vs paid time off in California

4. Do Employers Have to Offer Paid Time Off in California?

5. What impact does FTE have on PTO?

6. How Does Accrual of PTO Work?

7. Does California allow vacation time to be cashed out?

8. Can sick days be used as paid time off?

Introduction

Workers want to know how much time they have earned for vacation and various personal needs, and companies want to comprehend what they are required to provide. Offering vacation and paid time off doesn’t have to be difficult, provided that everyone has knowledge of California’s regulations. The purpose of this resource is to help employees and employers better understand California’s paid time off rules so that everyone’s requirements can be satisfied.

PTO: What is it?

The term PTO refers to paid time off. This alludes to any period of time when a staff member is not working but is nevertheless paid. The most popular forms of paid time off include parental leave, jury duty, vacation time, medical/sick leave, personal time, bereavement leave, and holidays.

1. What is the use of paid time off in California?

The purpose of paid time off (PTO) is to guarantee that workers receive their regular salary even though they are not in the office. While paid vacation time is not mandatory in California, sick leave is. Eligible workers are granted a maximum of twelve weeks of unpaid, job-safe leave annually under the FMLA (Family & Medical Leave Act), but only for approved family and medical needs.

2. Conventional Paid Time Off in California

In California, employees are entitled to traditional paid time off (PTO), which usually consists of earned vacation & sick leave. PTO is accrued by workers over time, and companies are required to abide by state rules pertaining to accumulation rates, rolling over, and the distribution of unused PTO. PTO accrued is regarded as wages in California, and workers are entitled to reimbursement for any unused PTO at the time of separation or termination.

3. PTO Bank

Since cumulative paid leave is still used for vacation, personal time, and sick days, the idea behind a PTO bank is virtually the same as that of traditional PTO. The main distinction is that the PTO bank allows employees to spend their earned time off for whatever reason they desire by combining all of these leave kinds into just one bank of hours. Companies in California are required to make sure that accrual rates, utilization, and payment upon separation all comply with state legislation.

4. Unlimited Paid Time Off in California

Policies that allow unlimited paid time off give workers the freedom to utilize time off without worrying about accrual restrictions. With the consent of their company, workers are permitted to take any amount of paid time off that they require. The policy has to be implemented in a way that conforms with state wage & hour rules. California legislation still has some restrictions, such as guaranteeing that workers can use accrued but unused paid time off upon separation.

Vacation vs paid time off in California

1. Is it preferred to take a vacation or use PTO?

Workers in California who want to take a vacation will choose paid time off (if the employer gives it). Some California organizations enable employees to combine vacation and sick leave policies, thereby allowing them to utilize paid sick time for “every reason,” even though paid time off (PTO) is limited to use for its specified purposes. Companies that give employees a lot of leeway in sick absence are establishing earned benefits, which affects what happens in the event that an employee quits. This also applies to policies that combine vacation and sick leave.

2. Are PTO & vacation pay equivalent?

California law requires sick leave. It does not mandate vacation pay (a form of paid time off). Employers are not required to offer their workers paid/unpaid vacation time in California. Nonetheless, a lot of them do so because they understand the benefits of providing this perk to their employees. When businesses do provide paid time off, there are limitations on how they might fulfill this requirement.

3. How to obtain vacation time

Californians are able to collect vacation time over time or earn it in fixed amounts, like one week annually. As work is done, vacation time is earned in the shape of money. Based on the number of workdays provided as vacation time throughout the year, it is accumulated. Each week, day, pay period, or other term set by the company could be used to calculate it.

Companies are allowed to impose restrictions on compensated time off under California law. For example, when hiring a new employee, a company may impose a waiting or trial period. The worker is not eligible to receive paid vacation time during this time.

4. Employer denying paid time off in California

California employers have the authority to oversee their vacation pay obligations. It includes determining when and how much paid time off can be utilized at a time. They could specify requirements for prior notice or exclude specific dates from vacation permission.

However, once vacation time has been earned, it cannot be taken away from an employee because it is considered earned time. Under California’s employment law, an employee’s accumulated vacation time cannot be deducted or expire, regardless of what some companies may attempt to argue. Still, employers have the right to cap vacation accumulation until the worker takes some time off.

Do Employers Have to Offer Paid Time Off in California?

In California, employers are exempt from providing paid time off (PTO) beyond sick leave. Employers in California are required to offer at least 40 hours or 5 days of paid time off for sickness. Local rules in certain cities demand a longer period than that.

1. Could my PTO be rejected?

Employers have the authority to limit paid sick leave use to 40 hours or 5 days annually and mandate that time be utilized in chunks of no more than two hours. They are not allowed to reject a legitimate request for sick leave or take adverse action against workers for using it. If you ask for vacation time during a time that your employer has designated as off-limits, California law permits your company to legally refuse your request.

2. Is PTO provided to all employees?

Some workers might not be entitled to paid time off for illness in California. This includes workers covered by bargaining agreements, workers from the In-Home Supportive Services (California) Program, and some workers from air carriers.

3. How is paid time off in California affected by a layoff?

Upon termination, sick leave, the sole required paid time off, is not required to be paid out. Vacation hours, “earned” sick days, and hybrid sick/personal days are examples of discretionary paid leave that must be distributed to employees upon their separation. Employees receive reimbursement for these benefits in the shape of compensation on their last paycheck, which is calculated at their last rate of pay.

What impact does FTE have on PTO?

Employees can take paid sick leave as long as they’ve worked the required hours.

Definition of full-time equivalent

Employees’ time worked, regardless of their weekly work schedules, is measured in full-time equivalents, or FTEs.

Calculating FTE

A worker who works part-time is given an FTE number depending on their workload in comparison to a full-time employee, whereas a full-time worker is one FTE. The computation involves dividing the scheduled hours of a worker by the number of hours that employers perceive to be a full-time week. For example, if forty hours per week is equal to 1 FTE, then twenty working hours per week is equal to 0.5 FTE.

How Does Accrual of PTO Work?

Any staff member who works a minimum of 30 days a year in California is entitled to sick leave, which is the only paid time off that is required. On the initial day of work, individuals can start earning paid sick leave, but they can’t use it until they’ve been employed for at least ninety days. For every thirty hours worked, employees will be granted one hour of compensated sick leave.

Offering each worker 5 days of paid time off for illness at the beginning of the year is one way for employers to streamline this procedure.

During PTO use, do you accumulate PTO?

In most cases, companies are free to choose their own policy regarding optional PTO, such as paid vacation days. PTO accumulation may continue throughout paid leave for some, while others may decide to base accumulation on hours actually performed.

Does California allow vacation time to be cashed out?

Vacation time provided by an employer is regarded as earned income. It is therefore irrevocable and builds up as the worker puts in more hours.

California law authorizes employees to “cash out” their accumulated vacation time when they continue to work, but only if their employer’s policy specifically permits it. The vacation or PTO policies of your organization should be reviewed. Certain employers might let you cash out your time off at your present pay rate at the conclusion of the year or at certain points in the year.

All unused time off must be reimbursed by your employer. It is given in the form of your last paycheck (after quitting or firing). California law views accumulated vacation time as a type of pay that the employee has already received.

It is important to find out the particulars. You should first study your company’s policy or speak with the Human Resources team. You can understand how to cash out the vacation time while you are still employed. You will receive payment for any time you did not use if you quit your work.

Can sick days be used as paid time off?

This is contingent upon the employer’s policies. In California, sick days constitute a distinct and guaranteed type of paid time off under normal law. Some employers might decide to provide sick days that can be utilized for any purpose or a combination of personal and sick time under a single PTO.

1. Does PTO in California equate to sick leave?

State law only requires sick leave, even though it is a form of paid time off, unless a company chooses to offer additional paid time off. Sick leave, however, is not regarded as a wage in California, so the employer is exempt from paying an employee for unclaimed sick leave at the time of termination. Employee sick leave is seen as pay if the employer maintains an all-purpose paid time off policy that permits accrued leave to be used for any personal purpose.

2. Is it necessary to obtain a medical note following the illness?

To use accumulated paid sick leave, a doctor’s note is not required. When they need to use this leave, they need to make a request, either in writing or verbally.

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Paid Time Off California: Laws, Accrual, Vacation Pay, and Employee Rights

Introduction

PTO: What is it?

Vacation vs paid time off in California

Do Employers Have to Offer Paid Time Off in California?

What impact does FTE have on PTO?

How Does Accrual of PTO Work?

Does California allow vacation time to be cashed out?

Can sick days be used as paid time off?

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