Orange County Employment Lawyers Blog
Summer is the season for vacations. But as a Los Angeles employment lawyer, I see many mistakes employers make with regard to vacation policies. I’m referring not just to poorly-planned or problematic policies, but ones that may potentially run afoul of the law. 
As the California Department of Industrial Relations points out, there is no law that requires employers to provide workers with vacation time – paid or unpaid. However, if the employer does have a vacation police, agreement, or practice to provide paid vacation, then there are certain restrictions that apply with regard to how the employer must implement it. (One might wonder, then, why employers provide it at all – and it comes down to the fact that it’s an expectation that many prospective employees have. Companies would have a tough time recruiting good workers if they offered no vacation time at all. The U.S. Bureau of Labor Statistics reports 90 percent of full-time employees in private industry receive some amount of paid vacation.)
As employees are cashing in this summer on their pre-scheduled vacation time, here are some things they – and their employers – should keep in mind.
- Employers are not allowed to implement “use-it-or-lose-it” policies for vacation. Vacation under California law is treated the same way as earned wages. That means that time accrues, and vacation is earned proportional to the time an employee works. So if an employee earns vacation time, they cannot legally “lose” it.
- Reasonable limits on vacation time are allowed. Although a company can’t take away accrued vacation time once it’s earned, employers are allowed to put a cap on the maximum amount of time one can earn. So once an employee reaches a certain amount of accrued time off, they may be prohibited from adding any additional time, at least until the balance of hours falls below that limit. It’s important to note, however, that these limits have to be reasonable. If the limits aren’t reasonable and are merely a ploy to deny workers their vacation time or vacation benefits, then the policy isn’t going to be recognized by the state Labor Commissioner.
- Accrued vacation should be counted as earned wages if employment ends. If an employee leaves or is terminated, all of their accrued vacation must be paid in the form of wages immediately. This is spelled out by the Division of Labor Standards.
- Employers cannot deduct the cost of used vacation time that wasn’t yet earned by the employee from their final wages. This isn’t a common scenario, but let’s say your employer agrees to let you take two weeks of vacation, even though you’ve technically only earned one week. You both figure you’ll make it up as you continue to work through the rest of the year. You take the vacation, but then leave the company before the year is up. The law considers the employer’s decision to allow you to take vacation time you haven’t yet earned to be akin to a loan. That said, employers are not allowed to recover debts from employees by withholding that amount from your final wages.
- Employers that enact “cliff vesting” vacation policies may run into problems. As our Los Angeles employment lawyers explain, it’s not uncommon for companies to set a probationary or waiting period during which a worker doesn’t rack up any vacation time. This is legal. However, what they cannot do is have a policy that gives their employee a lump sum of earned vacation time when they reach a certain milestone, such as a one-year anniversary, if they don’t allow the employee to take any vacation prior to that date. The issue with this is that the company is providing accrued vacation, but limiting its own legal responsibility of having to pay that pro rate share of vacation time if the employee does not reach that milestone. Most employers are able to sidestep this issue by not providing a lump sum of vacation time, but rather setting a time limit on how long an employee must work there in order to start racking up vacation time.
The specific legal parameters of vacation time can vary greatly from state-to-state. California’s rules are more stringent than federal law on vacations. It’s important that both employers and employees ensure their rights and obligations are being met under the rules of the jurisdiction where they work and operate.
Contact the employment attorneys at Nassiri Law Group, practicing in Newport Beach, Riverside and Los Angeles. Call 714-937-2020.
Additional Resources:
Paydays, pay periods, and the final wages, California Department of Industrial Relations, Labor Commissioner’s Office
More Blog Entries:
California Misclassification Lawsuit Settles for $16 Million, June 30, 2022, Los Angeles Employment Lawyer Blog