Vacation Time – What You Should Know

In prior posts I discussed the abuse of unemployment insurance and my belief that it should be privatized.  Today I am discussing employers and their treatment of vacation time.

sidebar-scaleIn California, companies are not required to provide vacation time, but many often due to attract and retain talented employees.  Unfortunately, I think many companies are looking for ways to trim expenses wherever they can and vacation hours are being targeted.  I offer the following educational piece on how to defend yourself.

Due to the recession, I have heard a lot about employers forcing employees to use up their vacation time prior to some date or event, such as by the end of the year or the employee will lose the hours.  They may not come out and say you will lose it, they may be simply suggestive of it and are hoping you misinterpret their suggestion in such a way that you relieve them of some of your vacation hours before you normally would have liked to.

I’m not a lawyer, but I do try to research and consolidate information into a useful format for you.  You should click on the link I provide at the bottom of this post for more information and you should review your employer’s policy manual to see their vacation time policy.

If an employer offers vacation time, it is earned as unpaid wages which cannot be forfeited.  In other words, an employer can not make you forfeit vacation time any more than they could make you forfeit a part of your salary.

According to the California Division of Labor Standards Enforcement, this is known as a “use it or lose it policy” and it is illegal in California.  Clearly, the fact that there is an acronym for it and it shows up on every FAQ sheet I looked at means that many companies attempt it.

A company can stop accruing your vacation time at a given point, but they must have a clearly defined policy in place that states how many hours you can accrue before the accrual is capped, or some other methodology.  Outside of such a policy, there is no limit to what you can accrue and there is no legal way for a company to take vacation hours from you or stop the accrual of those hours.

What you need to know is (Labor Code Section 200-243):

  • Employers do not need to provide vacation time.  They can choose whether part-time, full-time, neither or both get any.
  • Vacation time is accrued daily just like wages, which means when you leave for any reason, they must pay you up through the day of termination, not just through the last pay period, and you must be paid those hours at your most current wage.
  • An employer can not make you use your vacation time. (Update 3/26/10: I have had a few good questions from readers on this bullet point so I decided to write a letter to the California Department of Industrial Relations to answer once and for all some of these most commonly asked questions. Post coming soon.)
  • An employer is allowed to have in place a “No Additional Accrual Policy.”  All that means is when you hit the ceiling on your vacation time, according to their policy, you stop accruing it.  They can’t take it away, and they can’t make you take it, they just don’t have to make it any bigger.  You should check to see if your company has such a policy.
  • An employer can opt to pay all of your vacation time to you rather than continuing to accrue it.  Again, you remain whole because vacation time is considered earned wages so the employer simply cashed your “wages” out and gave them to you.
  • If your company permits you to take vacation time in advance of actually earning it, and you leave for whatever reason, they can not deduct the unearned vacation time from your final paycheck.  In other words, your company simply takes a risk that you will accrue those “owed” vacation hours back, but if you don’t, there is nothing they can do about it.
  • PTO time is treated exactly the same, from a legal standpoint, as vacation time.  It too, is considered earned wages.  If you leave, they must pay you out the total value to the day of termination at your current rate.
  • A company can delay accrual of wages when you first start.  For example, they can have a policy that states that vacation time does not accrue for the first six months of employment.  Understand that they must have a policy in place that actually defines this, otherwise, if you qualify for vacation time, it begins accruing the first day you work.  This prevents employees from saying you have to work a year before you can take a week of your vacation time off.  Unless their policy specifically states that, you earn time off your very first day.
  • Employers can control when vacation time is used.  This does not mean they can make you take it, it means they can control who takes how much and when.  This is to prevent entire departments being crippled by too many people leaving at the same time or someone critical to a process taking 12 weeks in a row.  They could split the 12 weeks up, for example.

Ultimately, you should review your company’s employee policy manual and see what their specific policy is on vacation time, if any.  You might be surprised at what you find.

If you’ve left your company and have calculated that you were not paid all of the vacation wages due to you because of, for example, a “use it or lose it policy”, you can file a wage claim.

If you think that suggesting any of the legal arguments about vacation time to your employer led to a discriminatory termination, you can always file a claim.

Site Reference: California Labor Law

Categories: Unemployment & Labor Law

Tags: , , , ,

7 replies

  1. I have a question. My employer says it is double dipping if we take vacation time on days he has closed the office. For example we get Martin Luther King day off but we aren’t getting paid for it. Can we take a vacation day to cover our lost wages or is it double dipping

    • That is a great question. I’m surprised your employer cares that you are using vacation time over an unpaid holiday. As far as he’s concerned, on his books, your vacation time is a liability sitting in his accrued vacation time account – wages that have not been paid yet, but owed. So he’s just moving money from his liability account and realizing it as an expense when he pays it out to you. Either way, it should be all the same to him. I’ll do a post on it soon.

  2. I have a question. Can an employer in Calif. stop offering paid vacation at any time they want?

    • Theresa,

      An employer is free to end their vacation time benefit program any time they wish. However, they are still obligated to maintain whatever vacation time has already been accrued for eligible employees and must still pay them when they consume that accrued vacation time, or cash it out to them. The decision to pay as it is consumed or cash it out belongs to the company.

      They must also provide notice to their employees in writing that they are changing or eliminating their vacation accrual benefit practice.

      Vacation time is not mandated by the government. It’s a benefit that companies offer to make themselves more competitive when potential employees are looking around for the best place to work. It’s no different than health benefits, gym memberships, tuition reimbursements, discounted movie tickets or the free candy in the bowl at the reception desk. None of these are required by the government. These are all just things that companies use to try and entice talented employees or job seekers away from other companies beyond just salary and to keep existing employees happy enough to not want to leave.

      Some other examples could include; in-house daycare, bring-your-dog-to-work-days, casual dress days, flex time scheduling or a cafeteria with discounted menus. Again, all perks but none are required. Based on the company’s culture, some of these can work and some won’t. Each company comes up with a mix of benefits that works best for them.

      The reason your question is so common is because we have all gotten used to having vacation time, so much so that it’s everywhere and that makes it look like its required. The reality is, we recently moved away from being a ditch digging country to something that required more than shovel handling skills in an employee. As companies grew more sophisticated and moved away from manufacturing industries towards knowledge-based service companies that incorporated technological advancements, businesses began demanding more educated and talented workers from a relatively small pool of college graduates.

      Realizing that more money makes everyone happy, but other things make some people happier than others in their pursuit of a “dream job” or a “great place to work,” companies started getting creative in what benefits they offered besides a salary. One of the first was vacation pay. That became the first benefit any company would offer, and they piled on new ones from there.

      When a company ends their vacation accrual benefit, or stops providing discounted movie tickets or even stops putting candy in the bowl at the reception desk, that just makes them a less attractive company to work for, but not an illegal one. I’d also add that a company that ends that particular benefit must realize they are putting themselves at a severe disadvantage in attracting, and retaining talented employees.

  3. Can an employer make u take vacation at a specific time?
    This is what was told to me “one of you guys need to take vacation since both the bosses will be gone”

    • Jane,

      In looking at California specifically, item number six on the Department of Labor page states, “it can do this by controlling when vacation can be taken and the amount of vacation that may be taken at any particular time.”

      If you look at the wording closely it fits what I’ve read in other articles which is that a company can control when vacation can be taken, in other words, if you choose some days to take off, and those days don’t work for the company, they can say no. For example, if you want to take a Friday off and Friday happens to be the busiest day for your company, they can say no. Or if you want to take a week off four months from now and on that week the company is going to do inventory counts or something where they need everyone, they can say no. Most often this is used when multiple employees take the same days off, and the company has to ask one or more of them to pick different days because the company needs coverage in a department and can’t let everyone leave at the same time.

      The second part of that sentence says that a company can control the amount of vacation time taken. This is for the same reasons as above. If you have 8 weeks of vacation time coming to you and you work for a suntan lotion company…taking all 8 weeks in the height of the summer is going to be looked down upon and they may tell you that you can only take 2 of the 8.

      Both of these are reasonable to me. I did find a few data points that said a company can make you take time off, but it’s generally understood at the time of hire. In other words, if it’s a manufacturing company and they furlough most of their employees for two weeks at a fixed point in the calender to re-tool, or whatever, then they can force all employees to take those days off. To me, this is a terrible trade-off because all you do all year is save vacation time to consume it during your mandatory furlough days…so if you don’t feel like going to Bermuda whenever those days are, you don’t have many options for taking your own vacation when you feel like it.

      Since vacation time is an option, companies have lattitude on what to do with it. The only thing they can not do is not compensate you for it. Whether that compensation comes in the form of cash or required paid-days off, they must treat it as wages and pay you for it.

      What I can not find is if a company can force you to take days off, at random, and use your vacation time to do it. So as of today, I’ve written a letter to the California Department of Industrial Relations to ask them if that is possible. I will post the results.

  4. so i have worked at my job for 14 months and i already took my 2 weeks paid vacation then i quit and when i went to get my final paycheck i got zero dollars!!! they made me pay for my suppositly unearned vacation!? can they do that?

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