California law does not require employers to provide its employees with paid or unpaid vacation time. However, employers who do provide their employees with paid vacation must follow certain requirements. Specifically, an employee’s earned vacation time is considered wages. Vacation time that is accrued cannot be forfeited. In other words, “use it or lose it” policies are illegal. Employers can, however, place a reasonable cap on the amount of vacation time that an employee accrues. Employers can also require an employee to be employed for a certain amount of time before accruing vacation. However, when an employee’s employment ends (be it by termination or resignation), and the employee has not used all of his/her earned vacation, the employer must pay the employee his/her final rate of pay for all earned, accrued, and unused vacation days (just like wages). If an employer fails to pay an employee’s earned, accrued, and unused vacation at the time of termination, the employer may be liable for waiting time penalties (not to exceed 30 days of wages).
