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What You Need to Know About Vacation Pay / PTO in California

California law on vacation pay and PTO
California law does not require that employers provide employees with vacation or PTO. Further, an employer can legally require that employees work for a certain period of time without any vacation benefit, before they start accruing vacation time or PTO.

However, if the employer provides a vacation benefit, it may not have a policy that states that an employee loses that vacation time or PTO that has already been vested. This is because under California law, accrued vacation or PTO constitutes “wages” just like any other regular pay, which is payable to the employee at termination. California Labor Code Section 227.3 provides, in part, that whenever an employee is discharged "without having taken off his vested vacation time, all vested vacation shall be paid to him as wages at his final rate in accordance with ... [the] employer policy respecting eligibility or time served...." This means that if you are terminated or are laid off or choose to resign, your final check should include your unpaid but vested vacation time pay and PTO along with your final wages due. At the same time a policy that places a reasonable cap on accrual of vacation or PTO is generally allowed. 

In one case, the employer tried to avoid paying their terminated employee any vacation pay by arguing that a terminated employee was not entitled to vested vacation because he didn't not reach a one-year anniversary of employment with them. The employer's policy provided, on one hand, vacation accrual to employees regardless of the amount of they amount of time their worked for the employer, but it was calculate on the per-year basis.  The court rejected the employer's argument holding:  "The right to a paid vacation, when offered in an employer's policy or contract of employment, constitutes deferred wages for services rendered.Case law from this state and others, as well as principles of equity and justice, compel the conclusion that a proportionate right to a paid vacation "vests" as the labor is rendered. Once vested, the right is protected from forfeiture by section 227.3. On termination of employment, therefore, the statute requires that an employee be paid in wages for a pro rata share of his vacation pay. Suastez v Plastic Dress-up Co. (1982). 

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Law Office of Arkady Itkin - San Francisco & Sacramento Injury and Employment Lawyer
We represent employees and employers in employment and wrongful termination cases, as well as victims of serious injuries in San Francisco, Oakland, Sacramento, San Jose, Palo Alto, San Mateo and throughout Northern California. We all represent businesses and start-ups in a wide range of business and employment issues and disputes. 


57 Post Street, Suite 812, San Francisco, CA 94104; Tel. (415) 295-4730; Fax. (415) 508-3474; [email protected]
  • Home
  • Employment Law
    • Wrongful Termination >
      • At-Will Employment
      • Termination After Unfair Warnings and Write-Ups
      • Union Grievance, Workers Comp and Wrongful Termination
      • Labor Code 970 Claims
      • Promissory Estoppel and Employment Contracts
      • Implied Contract Claims
    • Discrimination >
      • Proving Discrimination
      • Age Discrimination
      • Disability Discrimination >
        • Protected Disabilities
        • Medical Leave / Disability Accommodations
        • Job Reassignment As A Disability Accommodation
        • SSI Disability Benefits and Your Court Case
        • Sample Request for Reasonable Accommodation
      • Pregnancy Discrimination
      • Race Discrimination
      • Sample Discrimination Complaint
      • DFEH and EEOC Investigations
    • Retaliation >
      • How to Prove Retaliation
      • Dealing with Retaliation While Still Employed
      • Retaliation for Complaining
      • Whistleblower Retaliation
    • Harassment
    • Defamation at Workplace
    • Prof. License Defense
    • Leaves of Absence >
      • Medical Leave as Reasonable Accommodation
      • FMLA Entitlement and Reinstatement to Work
      • CFRA Leave
      • Employers' FMLA Notice Obligations
      • Paternity Leave (FMLA)
      • Sample FMLA Leave Request
    • Wages / Overtime Claims >
      • Wage Claims
      • Employee or Contractor
      • Exempt / Non-Exempt >
        • Admistrative Exemption
        • IT Support Specialists Compensation
        • Computer Professional Exemption from Overtime
        • Recruiters / Account Executives Exemption
        • Complaining About Being Misclassified
      • Vacation Pay / PTO
      • On-Call Time Compensation
      • Deductions fr. Commissions
    • Unempl. Benefits Appeals >
      • Tips for EDD Phone Interview
      • Unemployment Benefits Appeal Hearing Representation
      • CUIAB Hearing Tips
    • Employment Law Blog
    • For Employers
  • Personal Injury
    • Five Tips For Injury Cases
    • Slip-and-Fall Injuries
    • Assault and Battery
    • Recorded Statements
    • Repairing Your Vehicle
    • Unpaid Medical Bills
    • Injury Law Blog
    • Medical Malpractice
    • Police Excessive Force
  • Practice Areas
  • About
  • Results
  • Submit Case
  • Contact
  • Resources
    • Consultations
    • Workplace Rights Checklist
    • Deposition Tips
    • Mediation Tips
    • Effective Mediator
    • Suing Current Employer
    • Severance Agreements
    • Workplace Investigation
    • Arbitration
    • Statutes of Limitations
    • Healthy Litigation Mindset
    • Trial Tips
    • Working Remotely
    • How To Find The Right Lawyer For Your Case