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.

Author: Brad Nakase, Attorney

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In California, the law does not require employers to give employees paid time off (PTO) or paid vacation days. That said, an employer can choose to provide vacation time as part of his or her company policy. In this case, his or her employees have a right to the granted vacation time, and under the law must be paid for any unused vacation time when they part with the company upon termination. An employer that does not reimburse an employee for unused vacation time could face a claim or a lawsuit to recover compensation.

In this article, our employment attorney in San Diego discusses California PTO law as follows:

In California, Are Workers Entitled to PTO Or Vacation Time?

According to the California Labor Code, an employer is not required to give his or her employees vacation time, PTO, holiday pay, or personal days. Often, employers offer vacation time a benefit to attract workers. But vacation time is by law not required.

Generally speaking, employers in California have the right to govern how vacation time is earned and when employees are able to take earned vacation time. For new employees, employers can impose a waiting period, meaning that the new employee has to wait for a certain set amount of time before being able to build up vacation time. This policy must be clearly stated. This is because in California, vacation days are considered a type of wages.

While an employer in California may choose to offer vacation time or PTO, if he or she does so, the vacation time must be treated like earned wages. Even if the employee does not use his or her vacation time, the vacation time does not expire. This condition also applies to part-time employees, not just full-time.

An employer is not allowed to take away earned vacation time as a form of discipline. When an employee leaves the company, the employer is required to pay out any unused earned vacation time, again, since vacation time counts as wages.

Example:

Jack is a full-time math tutor at MathAddict, a company based in Manhattan Beach. His employer has a vacation policy that grants him ten days of paid vacation each year. In the winter, Jack books a trip to Miami that will last five days. After the trip, he will still have five days of unused vacation time.

When Jack tells his boss about the vacation, his boss is angry and instructs him not to go. She says that many of his students have a big test that week and will need his help. Jack promises to rebook his vacation and teach Algebra instead. However, he decides to go to Miami anyway, breaking his promise. When he gets back to work, his boss fires him. His boss also refuses to pay out the remainder of his earned vacation time.

As Jack has broken his employer’s vacation policy by going on vacation at a time inconvenient for his employer, he is eligible to be fired. However, he still has a right to his unused vacation time, as it qualifies as earned wages. At the time of his firing, Jack’s employer must compensate him for the five days of unused vacation time in his final paycheck. If his boss does not do this, then she may receive “waiting time penalties.”

Sick Days

While employers in California do not have to provide vacation time to their employees, they do have to provide paid sick leave. Under California labor laws, employees who work at least 30 days a year must receive paid sick days.

Paid sick leave is earned at a rate of no less than one hour per 30 hours worked. If a full-time employee works 40 hours a week, then in one month, he or she would have earned a little over 5 hours of sick leave.

In California, paid sick leave is required for both exempt and non-exempt employees.

Can Earned Vacation Time Be Taken Away?

Again, vacation time must be treated like earned wages. Once an employee earns vacation time, it cannot be taken away. Nor can the vacation time expire. Some employers might have a “use-it-or-lose-it” policy that places an expiration date on vacation time. However, such a policy is a violation of California labor law.

An employer is allowed to require an employee to use earned vacation time. This would be an effort to avoid a worker building up too much vacation time to be used at once. An employer might also put a cap on how many vacation days an employee can earn. Both situations are legal under California law.

An employer is not allowed, however, to take away earned vacation time to discipline an employee. While the employer could always change the company’s vacation policy to ban vacation time, any earned leave is protected once earned.

Example:

Hank is an employee at Sunshine Rentals, a company that sells timeshares in tropical locations. At the end of the quarter, his boss Linda goes off on an angry tirade, accusing her team of not selling enough that quarter. She threatens to take away vacation time as punishment.

While Linda is allowed to adjust the company’s overall policy to prohibit vacation time, she is not allowed to take away vacation time already earned. Since Hank has accrued ten days of vacation time, he is entitled to that time off, and even if Linda is upset at Hank, she cannot take away that earned time. And if Hank is to quit his job the next day, Linda still has to pay out those unused vacation days.

Can an Employer Place Restrictions on Vacation Time?

Employer can indeed put restrictions on taking time off for vacation. These restrictions could include the following:

  • Employees must give a certain amount of notice before taking time off
  • Vacation policies may differ among other managers and employees
  • Vacation time must be approved prior to being taken
  • An employee may only take a certain number of days off in a row
  • Blackouts, or days when time off is not available to be taken

Vacation time cannot be restricted, however, based on illegal discrimination. A vacation policy cannot be determined based on race, religion, disability, sex, age, or any other protected group.

Example:

Horace is the manager of a hobby store that sells dollhouses and model trains. Seventy years old and crotchety, Horace does not like young people, or joy in general. Whenever one of his younger employee requests vacation leave, he denies it for some vague reason or another. Whenever an older employee asks for vacation leave, Horace grants it, no questions asked. While Horace is allowed to create general rules for his company’s vacation policy, his current policy may violate California law. Since he does not approve vacation requests of employees based specifically on their age, his policy may be discriminatory.

Are Employees Paid for Unused Vacation Time?

When an employee quits or is fired from a job, employers are required to pay the employee for any unused vacation time. This is because under California law, vacation time qualifies as earned wages. Therefore, if an employer does not reimburse an employee for unused vacation time, it is as though he or she is not paying the employee for hours worked. The employee would have the right to take the issue to court, seeking the denied wages.

Is “Use-It-Or-Lose-It” Legal?

In California, a “use-it-or-lose-it” policy is illegal. Vacation pay is a form of wages, so it cannot expire. Even if an employee does not use vacation leave by a certain date, they are still entitled to compensation.

Can an Employer Be Sued for Not Paying Vacation Time?

In California, employees can sue employers who do not pay out vacation time at the time of termination. An employee who leaves a company must receive compensation for any unused vacation days.

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