Use it or lose it vacation policy California

Is use it or lose it vacation legal in California?

Under California vacation law, earned vacation is treated as earned wages and a vest as the employee performs work. Because vacation is earned proportionally as the employee works, use it or lose it, vacation already earned is illegal under California law. A use it or lose it policy forces an employee to spend their built-up vacation time prior to a specific date. If the employee does not use their earned vacation time, then the PTO expires and is given up. In states where the use it or lose it practice is unlawful, as in California, there are other methods employers use to control and limit how much time off an employee builds up.

A use it or lose it vacation time policy puts a timer on the vacation days that an employee earns. If the employee does not take their time off before the assigned expiration date, then they forfeit the PTO. It should be noted that employers are not required by law to provide vacation time for their employees. However, many choose to do so. In fact, even part-time employees may earn vacation time. When an employer offers an employee vacation time through a collective bargaining agreement or employment contract, an employee is then entitled to it contractually. The catch is that employers can put restrictions on how and when an employee uses their paid time off.

Use it or lose it is a common restriction put on vacation time (except in California, where it is illegal). Under a use it or lose it policy, vacation time becomes unusable in one of the following situations:

• Upon a certain date, such as at the end of the calendar year
• After a certain amount of time has elapsed since the PTO was earned

After vacation time has expired under the use it or lose it policy, an employee no longer has those days off. Importantly, under this policy, an employee is not compensated for the vacation time they lost. As stated above, California forbids employers from having use it or lose it policies for vacation time.

Can an employer cap vacation accrual in California?

In California, employers are permitted to limit or cap the amount of vacation time employees earned without taking the vacation. California has no set number for a permissible cap, though the Department of Labor Standards Enforcement (DLSE) has said that the vacation cap should be no less than 1.75 times the annual accrual rate. The California DLSE says a cap on vacation time accrual must be “reasonable,” meaning reasonable vacation caps are allowed, but use it or lose it vacation is illegal.

Though California prohibits use it or lose it policies, the state allows employers to cap vacation pay in other ways. Instead of having old vacation time expire, an employer may do the following:

• Restrict when an employee may use their paid time off, such as by having a ‘blackout’ period during busy times of the year (i.e. holidays)
• Set a maximum amount of vacation days or hours that an employee may earn
• Limit how many days an employee may take in a row

It should be noted that while the above restrictions do not take away vacation time, as happens with a use it or lose it policy, they do force an employee to use their earned time off. Instead of vacation use it or lose it, however, an employee is prevented from earning more hours/days until he or she uses what they have.

Do you get paid for earned vacation days but not taken if you quit?

Can you lose vacation time in California?

Vacation time is to be treated like earned wages. Vacation pay accrues as it is earned and cannot be forfeited. Once an employee earns their vacation time, they cannot lose the vacation time if not used. Under California law, use it or lose it vacation policy is banned. As wages, once an employee has earned time off, they are entitled to receive it. This means that if an employer forces an employee to forfeit their earned vacation time without providing compensation, the employer is violating the law.

Also, because vacation time counts as wages, an employee is entitled to cash out unused vacation time upon leaving their job. A vacation policy of use it or lose it is wage theft.

That said, employers in California have other methods through which they can limit the amount of vacation earned. These restrictions are legal, so long as an employer does not take back any earned time. As one example, an employer may cap the number of vacation days an employee can earn. When an employee had hit their maximum number of days, they cannot earn any more vacation time.

Not all restrictions are legal in California, however. According to the California Division of Labor Standards Enforcement (DLSE), the following restrictions are unenforceable:

• Forcing an employee to use carry over vacation time before any new PTO is earned in the new year
• A requirement that an employee use all their PTO in the calendar year during which it was earned

If an employer in California violates any of these vacation time policies, such as by implementing a use it or lose it vacation policy, an employee should not hesitate to file a wage and hour claim.