Can My Employer Use My PTO Without My Permission?

In California, employers are prohibited from have a use-it-or-lose-it PTO policy.

By Brad Nakase, Attorney

Email  |  Call (888) 600-8654

Under California law, employers are not required to provide paid vacation or paid time off (PTO). Evidence shows, however, that employees who are allowed paid time off are generally happier and healthier. For the employer, this equals increased productivity and company loyalty. Therefore, many employers have chosen to offer PTO as an employee benefit.

But it’s not that simple. Employers who offer paid vacation time to employees must meet certain requirements. In California, vacation time is considered to be a form of built-in wages. This means that in the eyes of the law the employee has already earned that pay at the time of employment. Therefore, vacation time cannot expire and must be paid out to an employee upon termination of employment. The same rules apply to any other form of paid time off.

Sick leave is a little different. Under California law, employers must provide a certain number of paid sick days per year. This is not optional, unlike providing PTO or vacation time.

In this article, our attorney for workers discuss PTO as follows:

Vacation Time

Normally, an employee’s vacation time adds up over time. For instance, if a workplace grants an employee ten days of vacation every year, after six months that employee will have five days of vacation available to use.

But not so fast! Employers might require a waiting period when an employee is first hired. This means that for a while, a new employee will not build up vacation time. Often, this period lasts 90 days, but it can last as long as a year.

Employers may also make vacation eligible only to certain groups. Of course, they must not discriminate against a particular group based on characteristics such as race or gender. They may, however, give vacation only to full-time employees, as an example.

Vacation Caps

Some states have a “use-it-or-lose-it” vacation policy. Under such a policy, built-up vacation must be used by a certain date, or else it must be given up. Usually, the date is the end of a calendar year. “Use-it-or-lose-it” policies are often viewed as illegal, because vacation time is considered earned wages. These policies are thereby withholding owed wages.

It is possible, and permissible, for employers to put a cap on vacation time. This means that once an employee reaches a certain number of days, vacation will stop building up until some of the time is used. Employers may thereby prevent employees from building up unreasonable amounts of PTO.

Example:

Joan is thrilled to learn that her company has a vacation policy of ten days a year. She would like to take a month-long tour of Europe, and she decides to not use her vacation days for three years in order to build up 30 days of PTO. Her boss tells her this is not possible. Why?

The California Department of Labor Standards Enforcement (DLSE), which enforces wage and hour laws in California, provides guidelines for employers and for the benefit of employees. According to the agency, a vacation cap should be no less than 1.75 times the yearly accrual rate, or must otherwise be within reason.

To return to our example, Joan’s company has a vacation cap of 1.75 times the yearly accrual rate. This means that Joan can rack up 17.5 days of vacation as a maximum. Once she reaches that number, she must use some time in order to earn more days. Sadly, she cannot take her planned month-long trip to Europe using solely PTO.

Scheduling Vacation

When it comes to scheduling, employers have a lot more leeway to design their vacation policies. Generally speaking, employers can determine how and when their employees can take PTO. For instance, an employer can require his or her employees to submit vacation requests in advance. Employers can also implement “blackout” dates, which are period during which employees cannot take time off. Holidays and tax season are often blackout dates in certain industries. Similarly, employers can control how many employees are on vacation at any one time. This way, the workplace does not become understaffed.

The employer has the freedom to regulate when vacation is scheduled as long as his or her decisions are not discriminatory (based on age, sex, religion, race, etc.)

Vacation Payout

When an employment contract is terminated, all built-up and unused vacation time must be paid back to the employee. Because vacation time is considered earned wages, it must be paid back to the employee along with the final paycheck.

Regarding an employee’s final paycheck, the following applies:

  • If an employee is fired, the final paycheck is due immediately upon firing
  • If an employee quits, giving 72 hours’ notice, the final paycheck is due at the time of quitting
  • If an employee quits, giving less than 72 hours’ notice, the final paycheck is due within 72 hours of quitting

Paid sick leave is not affected by the same laws, and they do not have to be paid out to an employee. However, if sick days are part of a company’s PTO policy, they are treated the same as vacation days and must be paid out upon an employee’s separation from the company.

Personal Days

Some employers offer a define number of “personal days,” also known as “floating holidays” each year. Holidays that are related to a particular event typically don’t require to be paid out upon termination of employment. So, if an employer wishes to give an employee PTO over Christmas, the employee’s birthday, or wedding anniversary, the employer does not have to pay out these days. However, if the personal days may be taken at any time of the year for no specific occasion, then they are treated as vacation and must be paid out.

Advances on Vacation

Employers are allowed to give vacation to employees in advance. However, they are not allowed to deduct that advanced vacation from an employee’s paycheck if the employee quits.

Here’s an example to illustrate the point:

Gloria has only accrued one week of vacation. She asks her boss if she could take a two-week vacation to Morocco. Her boss agrees to advance her a second week of vacation time. After her vacation, Gloria quits her job to work at a hookah lounge. By law, her boss cannot subtract the second week of vacation’s monetary value from her final paycheck.

Waiting Time Penalties

Vacation time is considered earned wages, so an employer who does not pay out vacation with the final paycheck could face “waiting time penalties.” A waiting time penalty is the employee’s daily wage for as many as 30 days. Employees whose vacation is not paid out may file a claim with the DLSE or otherwise sue their employer in court.

Have a quick question? We answered nearly 2000 FAQs.

See all blogs: Business | Corporate | Employment Law

Most recent blogs:

What is an EDD Audit?

An EDD audit is a payroll tax audit initiated when a former worker you classified as an independent contractor applies for unemployment with EDD.  The EDD thinks you misclassified the worker as an independent contractor and audits your company. 

Using PTO for Paid Vacation Time

PTO is any time an employee gets paid while away from work, including paid vacation time. PTO is paid time off, meaning a worker may use PTO for any reason, such as paid sick leave or paid vacation time.

When to hire an employment attorney?

You should hire an employment attorney as soon as you are aware of the issue or believe something is wrong and that the employer is not remedying the issue, such as harassment, wrongful termination, or discrimination.

Is PTO Required by Law?

Employers in California are not required to provide any PTO, such as paid time off or paid or unpaid vacation, to their employees.

Are 10 Minute Breaks Mandatory in California?

Employers in California are required by law to give non-exempt employees one 10-minute rest break for every four hours worked. A non-exempt employee is generally a worker who is paid by the hour and not by salary.

Is Unpaid Training Legal in California?

Yes, unpaid training is illegal in California. California employers must pay for mandatory training. Employees not paid for meetings or job training can sue for unpaid training.

Can PAGA Claims Be Arbitrated?

The U.S. Supreme Court clarified on June 15 that companies can compel arbitration of an employee's individual of an employee's individual PAGA claim, the non-individual claims should be dismissed.

Can you get fired for dating a coworker?

Most employment is generally at-will, so employers can fire an employee for dating a co-worker. However, if the co-worker you're dating was not fired, the employer firing you could be considered gender discrimination, and you can file a lawsuit.

How to report a company paying employees under the table?

A worker can report cash wage "under the table" by hiring an attorney or reporting to EDD. Before you say that the employer is paying under the table, you should ensure that it is illegal because it is not illegal if done correctly.

Can an employer take away earned PTO?

Paid Time Off or PTO cannot be taken away or forfeited when the pay accrues as earned. An employer is prohibited from taking away earned vacation time to punish you.

What Makes a Strong Retaliation Case?

The standard for proving a retaliation case requires the worker to show that the supervisor's action against the worker might deter a reasonable worker from reporting discrimination or participating in the EEOC complaint process.

Do you get paid for training at a job?

Under California employment law, employers are legally obligated to pay employees for time spent training for a job. It is illegal for employers to require employees to undergo unpaid training.

What is paid time off?

Paid time off - also known as personal time off - is when an employee takes off work while still getting paid by the employer. Likewise, personal time off is when an employee gets paid or unpaid while away from work.

What does an employment lawyer do?

An employment lawyer help employers and employees understand their respective rights and obligations, such as wages, wrongful termination, overtime, PTO, disability, discrimination, harassment, etc.

13 Wrongful Termination Examples

Employees wins millions of dollars in wrongful termination lawsuits against their employers. If an employee has been dismissed for the reason that is deemed illegal in California, then they may be able to sue their former employer for wrongful termination.

How do I know if I am exempt from overtime pay?

As of 2023, to be exempt from overtime pay, you must make at least $62,400.00 per year or $5166.66 per month. To be classified as an exempt employee, your salary must be at least twice California's minimum wage for full-time employment. 

Women’s Rights When Experiencing Sexual Harassment at Work

Title VII of the Civil Rights Act of 1964 (“Title VII”) makes it illegal for employers to allow anyone to be sexually harassed at work by anyone else, regardless of sexual orientation, gender, or sex. Women who experience sexual harassment at work may experience a range of negative consequences, including mental and physical health problems, lower earnings, and career interruptions.

How to respond to a notice of PAGA lawsuit?

5 steps to defend a PAGA lawsuit: 1) contact a PAGA lawyer after getting a PAGA Notice, 2) locate the arbitration agreement, if any, 3) determine if the safe harbor provision of the PAGA state applies, 4) compile a list of all employees that were similarly situated, 5) Collect the employee's manual.

What happens if you get an EDD audit?

An EDD audit is a process of verification that you have correctly withheld and reported personal income tax for wages paid to your employees. If you get an EDD audit, you may be liable for a wide range of fines, interest, and penalties on taxes that you owe.

What are the 4 Caregiver rights in California?

California caregivers are entitled to rest breaks, meal breaks, minimum wage, overtime pay for working over 8 hours per day, and double time for working over 12 hours, including overnight stays. Employers often face lawsuits from caregivers for violating caregivers’ rights, such as basic wages.

Terminating Employee with Cancer

Cancer is protected under the Disability Act, which protects an employee from retaliation and discrimination because of health impairment related to a cancer diagnosis. An employer cannot discriminate against an employee upon discovering that an employee has a severe illness or cancer.

Can I be fired for work restrictions?

No, you cannot be fired for work restriction if it is based on disability. However, an employer can fire an employee in some situations if the employee has work restrictions.

Annualized Compensation

An annualized compensation is to a predetermined gross pay per month paid to an employee for twelves months, totaling an estimated annual income.  In other words, annualized compensation - also known as annualized salary - is an estimate of how much pay an employee will earn over the course of a year if they were to work the full year. For example, teachers commonly do not work summer months and therefore need to annualized their salary for reporting taxes.

Contact our attorney.

Please tell us your story:

4 + 0 = ?