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 2 weeks (10 work days) of vacation per year, after six months of work the employee will have earned 5 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.
An employer can, however, place a reasonable cap on vacation benefits that prevents an employee from earning vacation over a certain amount of hours. Moreover, unless otherwise stipulated by a collective bargaining agreement, upon termination of employment all earned and unused vacation must be paid to the employee at their final rate of pay.
Q: Can California Employers provide that no vacation is earned during the first six months of employment?
A: Yes. California law does not preclude employers from providing a specific period of time at the beginning of the employment relationship during which employees do 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. This type of provision will only be recognized if it is not a subterfuge (phony reason) and in fact, no vacation is implicitly earned or accrued during the first year or other period.
Q: How is vacation earned in California?
A: Paid vacation is a form of wages in California, so it is earned as labor is performed. An employer’s vacation plan may provide for the earning of vacation benefits on a day-by-day, by the week, by the pay period, or some other period basis.
In contrast to how vacation pay may be earned, the calculation of vacation pay for terminating employees (a quit, discharge, death, end of contract, etc.) who have earned, accrued and unused vacation on the books at the time of termination must be prorated on a daily basis and must be paid at the final rate of pay in effect as of the date of the separation.
Q: Can California Employers deny part-time employees from earning vacations?
A: Yes. California employers may exclude certain classes of employees, such as part-time, temporary, casual, probationary, etc. from their vacation time plans. To avoid any misunderstandings in this area, the vacation plan or policy should state specifically which employees are excluded.
Q: Can California Employer vacation policy require employees to use all of their annual vacation entitlement by the end of the year, or lose the unused balance?
A: No. Vacation pay is another form of wages which “vests” as it is earned. An employer policy that provides for the forfeiture of vacation pay that is not used by a specified date (known as a “use it or lose it” policy) is unlawful in California.
Q: Can California Employers combine vacation and sick leave plans into one program and call it “paid time off” (PTO), and provide employees with a certain number of paid days each year they can take off from work for any purpose?
A: “Paid time off” (PTO) plans or policies do not allow California employers to circumvent the law with respect to vacations. Employers that replace its separate arrangements for vacation and sick leave with a program granting employees a certain number of “paid days off” each year to be used for any purpose, including vacation and sick leave, provide the employees with an absolute right to take these days off. The law requires that such programs are subject to the same rules as other vacation policies.
Q. What action can an employee take if the employer does not pay their accrued but unused vacation if the employee quits or is discharged?
A. The employee can either file a wage claim with the Division of Labor Standards Enforcement (the Labor Commissioner's Office), or file a lawsuit in court against the employer to recover the lost wages. Additionally, if the employer no longer works for this employer, the employee can make a claim for the "waiting time penalty."
Q. What is the procedure that is followed after an employee files a wage claim?
A. After a claim is completed and filed with a local office of the Division of Labor Standards Enforcement (DLSE), it will be assigned to a Deputy Labor Commissioner who will determine how best to proceed.
Initial action taken regarding the claim can be:
(i) referral to a conference
(ii) referral to a hearing, or
(iii) dismissal of the claim.
If the decision is to hold a conference, the parties will be notified by mail of the date, time and place of the conference. The conference is held to determine the validity of the claim, and to see if it can be resolved without a hearing. If the claim is not resolved at the conference, the matter is usually referred to a hearing.
At the hearing the parties and witnesses testify under oath, and the proceeding is recorded. After the hearing, an Order, Decision, or Award (ODA) of the Labor Commissioner will be served on the parties.
Either party may appeal the ODA to a civil court of competent jurisdiction. The court will set the matter for trial, with each party having the opportunity to present evidence and witnesses. The evidence and testimony presented at the Labor Commissioner's hearing will not be the basis for the court's decision.
In the case of an appeal by the employer, DLSE may represent an employee who is financially unable to afford counsel in the court proceeding.
Q. What can an employee do if they prevail at the hearing and the employer doesn't pay or appeal the Order, Decision, or Award?
A. When the Order, Decision, or Award (ODA) is in the employee's favor and there is no appeal, and the employer does not pay the ODA, the Division of Labor Standards Enforcement (DLSE) will have the court enter the ODA as a judgment against the employer. This judgment has the same force and effect as any other money judgment entered by the court. Consequently, the employee may either try to collect the judgment themselves or the employee can request it to be assigned to DLSE.
Q. What can an employee do if their employer retaliates against them after the employee informs the employer that they are going to file a wage claim?
A. If an employer discriminates or retaliates against an employee in any manner (for example, discharges the employee) because the employee filed a wage claim or threats to file a wage claim with the Labor Commissioner, the employee can file a discrimination-retaliation complaint with the Labor Commissioner's Office, file a lawsuit in court against your employer.
If you have any questions about vacation time, please contact me for a FREE confidential consultation at (916) 333-4653 or Stephen_Fiegel_Esq@comcast.net.
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