As a law firm which specializes in Employment law matters in the city of San Diego, this is a question we come across often. California is one state which does not mandate employers to give their employees paid vacation.  However, if a company chooses to provide its employees with vacation, then the state has laws regulating how vacation must be paid.

The state of California treats vacation pay as earned income – and not as a gift to the employee.  Once earned, the employee has the right to claim to be paid his vacation pay.  For example, an employee may choose to go to work rather than use his vacation leave.  That employee is then entitled to be paid his unused vacation pay.  Also, if an employee resigns from the company for whatever reason the company should pay that employee his unpaid vacation pay.  Since vacation pay is considered earned income in California law, employers cannot use vacation pay as a form of disciplinary action to erring or non-performing employees.  It is not legal, for example, for a company to withhold unused vacation pay because the employee’s job performance was not satisfactory.

In calculating unused vacation pay for purposes of separation pay, California law maintains that the current wage of the employer must be followed.  Thus, it is possible that an employee has accumulated several days of unused vacation pay during his many years with a company.  Even if in some of the years, the employee earned lower wages than what he earned at the time of his resignation, he still would be paid his vacation pay based on his last and current wage.

Employers, however, also have rights under California law.  Employers provide vacation to their employees precisely as a way to motivate them.  For example, employers are within their rights to state how many days’ notice an employee must give prior to using vacation time.  The employers may sate in their company manuals that an employee can avail him or herself of a maximum five straight days of paid vacation leave.  Beyond that, the leave will not be considered paid.  Employers can also set a cap on accumulated unused vacation.  (This must be stated clearly in the company manual.)  Thus, an employee who reaches the cap of accumulated unused vacation may then be asked to use his or her vacation leave before more can be accumulated.

It would do well for both employers and employees to know the laws of California regarding vacation pay.  Should you find yourself in a labor dispute over vacation pay, you may consult with one of our San Diego employment attorneys, who specializes in labor practices.


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