Are Use-it-or-Lose it Vacation Policies Legal in California?

After working through a pandemic, many people have their eyes set firmly on their available vacation days. However, employers who have already taken a hit financially because of the pandemic, may be trying to find ways to reduce costs and increase labor, such as by creating “use it or lose it” vacation policies. These policies are common enough that you have likely heard of them, and they stipulate that any vacation time that you do not use by the end of each year (or a specified period) will not accrue, roll over to the next calendar year, or be paid out. Rather, unused vacation time will simply be lost as if it never existed to begin with. The only problem? These policies are illegal under California law. 

Why Use-it-or-Lose-it Vacation Policies are Illegal in California 

In California, vacation time is treated as a form of wages. Employers are not required to provide vacation time in any form to their employers, however, if they do, there are certain laws and guidelines that employers must follow. Because vacation time is treated as a form of wages, vacation time is considered to have vested as soon as it has been earned by the employee. For instance, if the employee receives two weeks of vacation time each calendar year, after six months the employee would be said to have earned one week of that vacation time. Like earned wages, this time cannot later be taken away. It can be used, accumulated and rolled over, or paid out by the employer when the employee leaves the company. 

When the vacation time is paid out at the end of an employee-employer relationship, it should be paid out at the most current rate of pay that the employee earned while working for the company, rather than at a reduced rate or the employee’s starting rate. It should be noted that an employer is permitted to put a “reasonable” cap on the amount of vacation time that an employee can accumulate, so be sure to check your company policy to see if there is a cap on vacation. 

An employer also has the right to delay the accumulation of vacation days for a probationary period, which is generally six months, but can be as long as 12 months. This means that an employee may work for an employer for a full calendar year before they are eligible to begin accumulating vacation days, depending on the policy that is in place, and that is legal. However, it is not legal to withhold vacation days from the employee for the first year and then grant the accumulation of days from the first and second year of employment in the second year as the California Labor Commission considers this to be an attempt to avoid the law. 

Schedule a Consultation with a California Employment Attorney If you have been deprived of the value of the vacation days that you rightfully accrued while working for your employer, your employer has broken the law and can be held accountable. Contact a California employment attorney today to get the money that you have earned.