There is no legal requirement in California that an employer provide its employees with either paid or unpaid vacation time. However, if an employer does have an established policy, practice, or agreement to provide paid vacation, then certain restrictions are placed on the employer as to how it fulfills its obligation to provide vacation pay.
Under California law, earned vacation time is considered wages, and vacation time is earned, or vests, as labor is performed.
For example, if an employee is entitled to two weeks (10 work days) of vacation per year, after six months of work he or she will have earned five days of vacation. Vacation pay accrues (adds up) as it is earned, and cannot be forfeited, even upon termination of employment, regardless of the reason for the termination. (Suastez v. Plastic Dress Up (1982) 31 Cal.3d 774.) An employer can place a reasonable cap on vacation benefits that prevents an employee from earning vacation over a certain amount of hours. (Boothby v. Atlas Mechanical (1992) 6 Cal.App.4th 1595.) And, unless otherwise stipulated by a collective bargaining agreement, upon termination of employment all earned and unused vacation must be paid to the employee at his or her final rate of pay. Labor Code Section 227.3.
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SOME FAQ REGARDING VACATION
1. My employer’s vacation plan states that no vacation is earned during the first six months of employment. Is this legal?
Yes. California law does not preclude an employer from providing a specific period of time at the beginning of the employment relationship during which an employee does not earn any vacation benefits. This could apply to a probationary or introductory period, and can even apply to the whole first year of employment. Such a provision in a vacation plan will only be recognized, however, if it is not a subterfuge (phony reason) and in fact, no vacation is implicitly earned or accrued during that first year or other period.
2. My employer’s vacation policy provides that if I do not use all of my annual vacation entitlement by the end of the year, that I lose the unused balance. Is this legal?
No, such a provision is not legal. In California, vacation pay is another form of wages which vests as it is earned (in this context, “vests” means you are invested or endowed with rights in the wages). Accordingly, a policy that provides for the forfeiture of vacation pay that is not used by a specified date (“use it or lose it”) is an illegal policy under California law.
3. I am a part-time employee, and am excluded from my employer’s vacation plan (only full-time employees get vacation). Is this legal?
Yes, it is legal. If an employer’s vacation plan/policy excludes certain classes of employees, such as part-time, temporary, casual, probationary, etc., such a provision is valid, and the agreement will govern. To avoid any misunderstandings in this area, the vacation plan/policy should state clearly and specifically which employee classification(s) are excluded.
4. My employer’s vacation policy provides that once an employee earns 200 hours of vacation, no more vacation may be earned (accrued) until the vacation balance falls below that level. Is this legal?
Yes, such a provision would be considered legal. Unlike “use it or lose it” policies, a vacation policy that places a “cap” or “ceiling” on vacation pay accruals is permissible. Whereas a “use it or lose it” policy results in a forfeiture of accrued vacation pay, a “cap” simply places a limit on the amount of vacation that can accrue; that is, once a certain level or amount of accrued vacation is earned but not taken, no further vacation or vacation pay accrues until the balance falls below the cap.
The time periods involved for taking vacation must, of course, be reasonable. If implementation of a “cap” is a subterfuge to deny employees vacation or vacation benefits, the policy will not be legal. For instance, the Labor Commissioner has repeatedly found vacation policies which provide that all vacation must be taken in the year it is earned (or in a very limited period following the accrual period) are unfair and will not be enforced.
5. Can my employer tell me when to take my vacation?
Yes, your employer has the right to manage its vacation pay responsibilities, and one of the ways it can do this is by controlling when vacation can be taken and the amount of vacation that may be taken at any particular time.
6. My employer’s vacation policy provides that if I don’t use all of my vacation by the end of the year, he will pay me for the vacation that I earned and accrued that year, but did not take. Is this legal?
Yes, your employer has the right to manage its vacation pay responsibilities, and one of the ways it can do this is by paying you off each year for vacation that you earned and accrued that year but did not take.
7. My employer has combined its vacation and sick leave plans into one program that it calls “paid time off” (PTO). Under this program I have a certain number of paid days each year that I can take off from work for any purpose. Does this allow my employer to circumvent the law as it relates to vacations?
No, a “paid time off” (PTO) plan or policy does not allow your employer to circumvent the law with respect to vacations. Where an employer replaces its separate arrangements for vacation and sick leave with a program whereby employees are granted a certain number of “paid days off” each year that can be used for any purpose, including vacation and sick leave, the employees have an absolute right to take these days off. Consequently, again applying the principles of equity and fairness, California law takes the position that such a program is subject to the same rules as other vacation policies. Thus, for example, the “paid time off” is earned on a day-by-day basis, vested paid time off days cannot be forfeited, the number of earned and accrued paid time off days can be capped, and if an employee has earned and accrued paid time off days that have not been used at the time the employment relationship ends, the employee must be paid for these days.
8. What happens to my earned and accrued but unused vacation if I am discharged or quit my job?
Under California law, unless otherwise stipulated by a collective bargaining agreement, whenever the employment relationship ends, for any reason whatsoever, and the employee has not used all his or her earned and accrued vacation, the employer must pay the employee at his or her final rate of pay for all of his or her earned and accrued and unused vacation days. Labor Code Section 227.3. Because paid vacation benefits are considered wages, such pay must be included in the employee’s final paycheck.
9. My employer does not allow employees to carry-over any unused vacation days from year-to-year. When I was discharged last week none of these forfeited vacation days were included in my final paycheck? What can I do?
You can file a lawsuit in court against your employer to recover the lost wages. Additionally, if you no longer work for this employer, you can make a claim for the waiting time penalty pursuant to Labor Code Section 203.
10. What can I do if my employer retaliates against me because I informed him that in California vacation is wages and cannot be forfeited?
If your employer discriminates or retaliates against you in any manner whatsoever, for example, he discharges you because you objected to the fact that your vested vacation was being forfeited and not carried over from year-to-year, or because you file a claim or threaten to file a lawsuit, you can file a lawsuit in court against your employer.
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SOME FAQ REGARDING HOLIDAYS
1. What are the basics regarding holidays?
Hours worked on holidays, Saturdays, and Sundays are treated like hours worked on any other day of the week. California law does not require that an employer provide its employees with paid holidays, that it close its business on any holiday, or that employees be given the day off for any particular holiday. If an employer closes its business on holidays and gives its employees time off from work with pay, such a circumstance exists pursuant to a policy or practice adopted by the employer, pursuant to the terms of a collective bargaining agreement, or pursuant to the terms of an employment agreement between the employer and employee, as there is nothing in the law that requires such a practice. Additionally, there is nothing in the law that mandates an employer pay an employee a special premium for work performed on a holiday, Saturday, or Sunday, other than the overtime premium required for work performed in excess of eight hours in a workday or 40 hours in a workweek.
2. Last week I worked eight hours on the 4th of July holiday, which fell on Wednesday. For the whole week I worked 40 hours. When I got my paycheck this week I was paid for 40 hours at my straight time rate. Aren’t I entitled to extra pay, of at least double time, for working on a holiday?
There is nothing in state law that mandates an employer pay an employee a special premium for work performed on holidays, Saturdays, or Sundays, other than the overtime premium required for work in excess of eight hours in a workday or 40 hours in a workweek. Unless your employer has a policy or practice of paying a premium rate for working on a holiday, or you are subject to a collective bargaining or employment agreement that contains such a term, your employer is only required to pay you your regular rate of pay for all the straight time hours worked on the holiday, and the overtime premium required for work in excess of eight hours in a workday or 40 hours in a workweek. Since you did not work over eight hours on the holiday, or more than 40 hours during the workweek, you were paid correctly.
3. My employer is open for business on every holiday, some of which I have to work. Isn’t this against the law?
No. There is nothing in state law that mandates that an employer must close its business on any particular day, if at all. It is up to your employer to select which days, if any, it chooses to be open and closed for business, and if your employer is open on a holiday and schedules you to work that day, there is nothing in the law that obligates your employer to pay you anything but your regular pay and any overtime premium for all overtime hours worked.
4. Last week we were closed for business on Monday to celebrate Memorial Day. Consequently, I worked Tuesday through Saturday that week, eight hours each day. When I got my paycheck this week I was paid for 48 hours last week at my straight time rate. Shouldn’t eight of those hours be paid at time and one-half, the overtime rate, since I was paid for more than 40 hours in the workweek?
No, you were paid correctly. In this situation, even though you did not work on the holiday your employer chose to pay you for it, which it has the absolute right and discretion to do. However, the determination of whether overtime pay is due is based upon hours worked, more than eight in a workday or more than 40 in a workweek, and not upon pay received. Thus, since you did not work more than eight hours in any one workday, or more than 40 hours in the workweek, you are not entitled to any overtime pay for the workweek.
5. We get 11 holidays off each year without pay. My sister gets the same 11 holidays off, and she gets paid for all of them. Is my employer breaking the law because he’s not paying us for these holidays when he’s required to, even though we don’t work on any of them?
No, your employer is not breaking the law. There is nothing in state law that mandates that employees be paid for holidays that are not worked.
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