Vacation Pay Explained – Question and Answer
Updated: Jun 10
Imagine you are walking along on the beach, seeing the sunset over the ocean, and hearing the rolling waves break on the sand. Ah yes, that is what some envision to be the perfect vacation. However, as adults, we work. As a work benefit, some employers provide Vacation pay. However, as you probably know, the laws surrounding it may be as clear as the ocean water – which, if you’re in the bay area, is quite murky. Here are some common questions and answers that I hope will make vacation pay laws a bit more revealing.
Q: What is Vacation Pay?
A: Vacation pay is a type of deferred compensation that vests once it is earned. For example, if your employer’s policy is that you earn 1 vacation day per month, and you work for a month, you are entitled to 1 vacation day.
Q: Are all California employees entitled to Vacation Pay?
A: No. California does not require that all employees receive Vacation pay. However, if an employer has a Vacation pay policy, and the employee is eligible, then he or she would be entitled to accrue vacation pay.
Q: If I am entitled to Vacation Pay, how do I earn it?
A: Vacation pay benefits are deferred wages and are earned on a pro-rata basis. An employer's vacation pay plan may state that the vacation benefits are earned on a day-by-day, by the week, by the pay period, or by some other period basis.
Employers may defer or delay the accrual of vacation days (i.e., employer may require an employee to endure a probationary period prior to the start of accruing vacation pay.) However, an employer may not mandate that vacation pay be earned in lump sums (i.e., survive the probationary period and automatically get 3 days of vacation pay.)
Q: My employer said if I don't use my accrued Vacation days, I’ll lose them. Is that legal?
A: No! An employee cannot “lose” earned Vacation pay! As stated above, Vacation Pay is a form of wages which is earned. As such, a “use-it or lose-it” policy that would result in you losing money is illegal in California. For example, if you have 16 days of accrued vacation pay and your employer tells you that you have to use 6 days or you will lose them, that is illegal.
Q: Can my employer limit or “cap” the number of Vacation Days I can accrue?
A: Yes. An employer can place reasonable caps on your accrual of vacation days. This is different from the “use it or lose it” because it prevents you from “earning” vacation days once you’ve reached the “cap.” Since Vacation days are not mandatory, the rationale is based in contract law. You cannot exceed the agreed-upon amount of accrual.
Q: Can my employer force me to use my Vacation days?
A: Yes. Your employer has the right to manage its vacation pay responsibilities. One way your employer does this is by controlling when vacation can be taken and the amount of vacation that may be taken at any particular time.
Q: What happens if I still have Vacation days when I quit or am terminated?
A: If your employment relationship ends, no matter the reason, and you still have earned and accrued vacation days, the employer must pay out all earned and unused vacation days at your final rate of pay (Lab. Code 227.3.) Also, since vacation days are considered deferred wages, the employer must include them in your final paycheck. For more information regarding your last paycheck, visit my other blog post – “Fired, But Not Paid.”
Q: What should I do if I no longer work for my employer, but I am still owed my Vacation Wages?
A: There are very strict time limits to bring an action to recover owed wages. If you or someone you know was terminated or quit and you had to wait, or are still waiting, for payment of earned vacation wages, you could either file a wage claim with the Labor Commissioner or you could file a lawsuit. If you would like help getting what you’re owed, plus any applicable penalties, you should consider hiring an experienced Vacation Pay Employment Law Attorney.
At the end of the day, you should let your ex-employer take a vacation with your money!
Disclaimer: All materials have been prepared for general information purposes only to permit you to learn more about Lansdown Law, its services, and experience. The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice.