This is an ongoing series looking at the nine California Labor Rules to Ignore at Your Own Peril. Today we’ll discuss Paying Unused Vacation Time.
When it comes to vacation time, California is not a “use it or lose it” state. All vacation time accrued and not used must be paid to the employee when they leave the company. Like the other requirements for pay at termination, vacation pay must be given in person to the employee upon termination.
Like many California labor laws, this requirement can’t be waived. It overrides any company policy that puts time limits on vacation; once the time is earned, it remains until it’s used or paid out. For example, if a company provides two weeks of vacation time every year, but mandates that it all be used in that same calendar year, the time would be carried over anyway. Specifying how much of the time may be carried over from year to year also isn’t enough to override this law. In California, the vacation time carries over regardless of policy.
The one limited exception is if your policy caps the amount of vacation time which may be accumulated. If the example company above, instead of requiring the time be used, had established a cap on the accumulation, that would be a stronger position to be in. Perhaps they could continue to dole out two weeks a year, but set a cap of six weeks total.
Setting vacation rules to comply with California’s laws is no more difficult than it is in less restrictive environments. The usability of an in-house payroll system affords you full control over the rules which are built into the system. Particularly for companies that have employees in California and elsewhere, this ability to customize makes compliance an automated process rather than a tremendous burden.
Whether you’re in California or not, Pacific Data Marketing can make sure that you aren’t ignoring important labor laws. Contact us to arrange for an audit of your payroll and human resource processes.