Under California law, accrued vacation is treated as earned wages. Employers cannot impose “use it or lose it” policies — once vacation is earned, it cannot be forfeited (Suastez v. Plastic Dress-Up Co.). On termination, all accrued and unused vacation must be paid out in the final paycheck.
Employers can cap accrual at a reasonable level and can set the rate at which vacation accrues. What they cannot do is wipe out vacation that has already been earned. Combined paid time off (PTO) policies that allow the employee to use the time at their discretion are generally treated as vacation for these purposes.
Failure to pay out vacation on termination triggers waiting time penalties under Labor Code § 203 — up to 30 days of wages at the employee’s regular daily rate — in addition to the unpaid vacation itself.
If you are not getting your PTO or Vacation Pay, contact us immediately.