Understanding Vacation Time Policies in California

California employers aren’t required to offer paid vacation, but laws govern accrued vacation, payouts, and policies to ensure fairness. Discover how California regulates vacation time, including accrual caps, payout rules, and key employer responsibilities.

By Douglas Wade, Attorney

Email | Call (800) 484-4610

Have a quick question? We answered nearly 2000 FAQs.

Table of Contents

1. What are the laws about California vacation time?

2. Accrual for Vacation

3. California Vacation Accrual Limits

4. Planning a Vacation

5. Payout for Vacation Upon Separation

6. Floating Holidays and Personal Days

7. Vacation Advances

8. Waiting Time Penalties

9. When Should You Seek the Advice of an Employment Lawyer?

What are the laws about California vacation time?

California law says that companies don’t have to give their workers paid vacation or time off (PTO). Studies, on the other hand, have demonstrated that providing employees with time off to unwind is beneficial not only to staff members but also to businesses. When workers are happy and healthy, they are more likely to stay with their current employers and produce better results. This is why a lot of companies provide paid vacation time to their employees.

There are regulations that businesses must adhere to if they decide to provide paid vacation. According to California law, an employee’s accrued vacation is like a kind of earned wages. This means, among other things, that accumulated vacation time cannot be lost and must be paid out to an individual upon dismissal or separation from the organization or when the person leaves the company. Paid time off follows the same regulations.

There are different regulations for sick leave compared to vacation and PTO. There is a minimum amount of paid sick days that California firms must provide their employees each year.

Accrual for Vacation

The standard practice is for vacation time to build up while an employee works. For instance, after six months on the job, an employee will have accrued five days of vacation, according to a ten-day vacation policy.

However, before vacation accrual begins, employers have the option to specify a waiting period. Although it is common for the waiting time to coincide with the initial 90 days on the job, it can last up to a full year.

In addition, companies are free to offer vacation benefits to some employees while denying them to others. Provided, of course, that this practice does not violate any laws against discrimination based on gender, race, or any other protected characteristic. For instance, some companies may choose to provide vacation benefits exclusively to managers or full-time staff.

California Vacation Accrual Limits

California does not follow the “use-it-or-lose-it” vacation policy that is common in other states. A “use-it-or-lose-it” policy stipulates that any vacation time that has been accumulated must be spent by a specific date, typically by the end of the year, or else it would be forfeited. One argument against use-it-or-lose-it practices is that they unlawfully deduct employees’ earned wages, which includes vacation time.

But employers can limit how much vacation time an employee can accrue. That is to say, workers will not be able to continue earning vacation time when they reach a specific number of days worked. This gives businesses some measure of control over vacation accrual and stops workers from taking too much time off.

The DLSE, which is responsible for enforcing wage and hour rules in California, has offered some recommendations, but there is no hard and fast rule about the maximum allowable amount. According to previous rulings by the DLSE, a vacation cap cannot be lower than 1.75 times the yearly accrual rate. But now the DLSE just says the cap has to be “fair,” and they’ve removed the hard and fast criterion. Although a 1.75 limitation is likely to remain the most secure ratio, a 1.5 cap could potentially be acceptable according to regulations. Using the following example, we can see how the vacation cap operates.

Example

Every year, Rainbow Inc. gives all of its full-time workers ten days off. Sunshine’s vacation policy allows for up to 17.5 days of paid time off, which is calculated as 1.75 times the yearly accrual rate of 10 days. The vacation time of an employee will be carried over from year to year, but if they hit 17.5 days, no additional vacation time will be accrued until their bank drops below that number.

Planning a Vacation

There is a great deal of leeway for employers to schedule their vacation arrangements anyway they see fit. For the most part, it’s up to employers to determine when and how workers can plan their vacations.

As an example, some companies have policies that specify how many days or weeks before employees must submit their vacation requests. Like the holiday season for retail businesses or tax season for accountancy firms, companies can also set aside particular “blackout” times when no employees can take vacation. Additionally, a boss might restrict how many workers can take vacations at once.

The employer has the right to determine the terms of vacation as long as they do not violate any federal or California laws that protect certain classes, such as those related to race, gender, religion, disability, or sexual orientation.

Payout for Vacation Upon Separation

When an employee leaves their job, the company is required to pay them any vacation time that they have collected but have not used. The employee’s final paycheck and vacation pay are due simultaneously since vacation pay is considered earned wages:

A person’s last paycheck is due upon termination of employment.
When an employee resigns with at least 72 hours’ notice, their last paycheck is payable immediately.
If an employee give fewer than 72 hours’ notice before quitting their job, the final paycheck is due within 72 hours of the time that the employee quits.
Employees are not required to have their paid sick days repaid when they leave the company if they have accrued them as part of an independent sick leave program. When sick days are a part of a larger PTO program, though, all of that PTO is considered vacation time and is due when the employee leaves the company.

Floating Holidays and Personal Days

There are some companies that provide their employees with a certain amount of “personal days” or “floating holidays” per year. It is not necessary to pay out holidays that are associated with a particular event when the employee has separated from the company. As an example, it is not necessary to pay out paid holidays that an employer grants for holidays like Christmas and New Year’s as well as birthdays and work anniversaries.

Personal days and floating holidays are considered vacation time when they are not associated with a specific event and can be used whenever needed throughout the year. That is to say, vacation time and floating holidays cannot be “used or lost” and must be paid out when an employee leaves the company.

Vacation Advances

Employers have the right to grant employees early vacation time, but they cannot take that time away from an employee’s final paycheck in the event that they leave earlier than anticipated. If an employee takes two weeks of vacation before quitting, but only has one week of accrued vacation, the employer cannot take that week off from their final paycheck.

Waiting Time Penalties

Employers risk “waiting time penalties” if they fail to pay vacation in a timely manner with the final paycheck since it is considered earned wages. For a maximum of 30 days, the waiting time penalty is equal to the worker’s average daily earnings. To recoup this penalty, employees can either sue the company or submit a wage claim with the DLSE if their vacation pay is missing from their last paycheck.

When Should You Seek the Advice of an Employment Lawyer?

Get in touch with an employment law expert to go over your alternatives if your employer hasn’t paid you on time or hasn’t followed California’s vacation accrual requirements.

Have a quick question? We answered nearly 2000 FAQs.

See all blogs: Business | Corporate | Employment

Most recent blogs:

What Is a Pay Stub and Why It Matters for Employees and Employers

Pay stubs detail wages, deductions, and taxes, helping employees track earnings and employers comply with state payroll regulations. They support loan applications, reduce payroll disputes, and are required or regulated in many states across the U.S.

What Are the Proper Steps to Fire Someone in California?

Terminating an employee in California requires following legal guidelines, maintaining professionalism, and ensuring proper documentation. This guide outlines lawful termination reasons, key procedural steps, and best practices to reduce legal and financial risks.

How Long Does a Misdemeanor Stay on Your Record in California?

A misdemeanor conviction in California stays on public record indefinitely but may be eligible for expungement under specific conditions. Background checks typically show misdemeanor convictions for seven years, but expungement can remove them from most employment screenings.

How Do I Prepare a Script for Firing Someone?

Learn the professional steps for firing an employee, from preparing a script to handling emotional reactions. Understand the proper procedures, reasons, and communication techniques to ensure a smooth and respectful termination.

What Is Involved in a PAGA Lawsuit?

PAGA lawsuits allow employees to file claims for labor code violations on behalf of themselves and others in California. Employers can face significant penalties, prompting many to settle to avoid costly judgments.

What Are the Rules for 10-Minute Breaks?

California law mandates two paid 10-minute breaks and a 30-minute unpaid meal break for an eight-hour shift. Employers who fail to provide required breaks may face penalties, and employees can seek legal action for compensation.

Can I Work Six Hours Without a Lunch Break?

California law requires a 30-minute meal break for shifts over five hours, but employees can waive it if working exactly six hours. Employers must comply with strict labor laws, ensuring uninterrupted meal breaks and legal protections for workers.

What Can I Do If My Employer Didn’t Pay Me on Payday?

Employers in California must pay workers on time, or they may face penalties of up to 30 days' wages for delays. Employees can file wage claims, seek legal assistance, or report violations to the California Labor Commissioner's Office for unpaid wages.

What Qualifies as a Hostile Work Environment in California?

Employees in California facing severe or persistent harassment based on protected traits may have legal options under state and federal laws. Filing a complaint with the California Civil Rights Department or consulting an employment attorney can help protect workplace rights and seek compensation.

When Is a Doctor’s Note for Work Required in California?

California employers generally cannot demand a doctor's note for sick leave, but exceptions exist under specific laws and circumstances. Legal conflicts persist, and employers may require medical documentation for disability accommodations, FMLA leave, or other valid reasons.

What Does California Law Say About Final Paycheck Rules?

California law mandates that final paychecks be provided promptly, with termination pay due immediately and resignation pay within 72 hours. Employers must include all owed wages, expenses, and accrued benefits, with penalties for late or incomplete payments.

Can an Employer Deny a Doctor’s Note?

An employer may deny a doctor's note if the absence does not qualify for legal protections under disability or family leave laws. Employers must evaluate medical documentation, employee statements, and applicable laws before considering disciplinary action.

How Much Can You Sue an Employer for Misclassification?

An employer's misclassification tactics can deny you fair wages, benefits, and legal protections. You may be entitled to compensation, including back pay, retirement contributions, and potential punitive damages, by pursuing legal action.

How Serious Is an EEOC Complaint?

An EEOC complaint can lead to costly legal battles, reputational damage, and mandatory policy changes for businesses. Employers may face financial penalties, investigations, and compliance requirements, impacting operations and workforce morale.

Do You Have Sample Letters for Termination of a Contract?

A contract termination letter formally ends a business agreement while protecting interests. This guide outlines key steps, considerations, and sample letters.

What Is a WARN Notice in California?

The California WARN Act requires businesses with 75 or more employees to provide 60 days' notice before mass layoffs, plant closures, or relocations. Noncompliance can lead to fines, back pay, and healthcare costs, making adherence essential for legal and financial stability.

What Is FICA and How Does It Impact Payroll Taxes?

FICA is a payroll tax that funds Social Security and Medicare, requiring contributions from both employers and employees. Employers must withhold, match, and submit FICA taxes while following IRS guidelines on deposit schedules, wage bases, and additional Medicare tax requirements.

What Is At-Will Employment and How Does It Impact Employee Rights?

At-will employment allows employers and employees to end their working relationship at any time without cause, impacting job security and flexibility. While it provides businesses with staffing flexibility, employees face fewer legal protections and potential job instability.

Employers Should Exercise Caution When Terminating Employees After Disability Leave

Employers should exercise great caution when considering whether to terminate an employee who is on leave. Employers are cautioned not to automatically terminate employment solely because an employee has used or exhausted their disability leave entitlement.

What Is FUTA? 2025 Rates and How to Calculate FUTA Tax

The Federal Unemployment Tax Act (FUTA) imposes a payroll tax on businesses that have employees, collecting revenue that funds unemployment benefits.

What Is the Difference Between a 1099 Contractor and an Employee?

A 1099 contractor operates independently, covering their own taxes and expenses, while a W-2 employee receives benefits and employer tax contributions. Misclassifying workers can result in fines, making it essential to assess control, financial arrangement, and job nature before classification.

How Do Contractors Typically Get Paid? Payment Methods and Legal Guidelines

Contractors receive payments through direct deposits, checks, payroll services, or online transfers, following legal and tax regulations. Proper classification, documented agreements, and compliance with IRS reporting ensure smooth transactions and avoid penalties.

What Is the Definition of a Non-Exempt Employee?

Non-exempt employees are entitled to overtime pay and must earn at least the federal minimum wage under FLSA regulations. Unlike exempt workers, they are typically paid hourly and receive 1.5 times their wage for extra hours.

Can Union Representatives Be Present at Disciplinary Meetings?

Employees have the right to request a union representative during investigative interviews that may lead to disciplinary action. Employers must comply or face potential labor law violations under the National Labor Relations Act.

What Is an FTE (Full-Time Equivalent)?

A full-time equivalent (FTE) measures employee work hours, combining part-time and full-time schedules into a standardized metric. Businesses use FTE calculations for staffing, budgeting, and compliance with regulations like the Affordable Care Act.

What Are the Signs of Unfair Treatment at Work?

Unfair treatment at work includes discrimination, pay gaps, and biased promotions, impacting employees' well-being and career growth. Recognizing signs like harassment, favoritism, and wrongful termination helps employees take action against workplace discrimination.

What Is a Statutory Employee on a W-2 Form?

A statutory employee is a self-employed worker classified as an employee for tax withholding purposes, receiving a W-2 instead of a 1099-MISC. These workers can deduct business expenses on Schedule C but typically do not receive traditional employee benefits like health insurance or retirement plans.

What Laws Protect Employees From Workplace Bullying

622