Should You Have Been Paid for Unused Vacation?

At Marlin & Saltzman, LLP, we routinely speak to clients who are surprised to learn that they should have been paid for any unused vacation and personal time when they left their jobs. As discussed in our post on failure to pay vacation and personal time, there’s no such thing as “use it or lose it” vacation days in California. Unlike in many other states, you cannot forfeit your vacation time—even if the employer’s policies say you must.

Even though state law is clear, some employers fail to pay for unused vacation, or fail to carry over earned vacation from year to year.

Part of the confusion may come from the fact that California is one of the few states that has this law. Many states permit the employer to make a clear policy saying it will not pay vacation as wages upon the end of the employment relationship, or specifying when it will do so.

But California Labor Code Sec. 227.3 requires most employers to treat vested vacation as wages, payable just like earned wages when the employee leaves. Vacation time does not disappear at the end of the year. That’s true regardless of whether the separation was voluntary. The only exceptions are employers that don’t provide paid vacation at all, and employment relationships that are governed by a collective bargaining agreement.

There are some additional rules. The employee must have accrued some vacation time during the employment, which means vacation pay won’t be available for people who’ve used up all their vacation, or people who haven’t had time to earn any. The vacation pay is paid at the wage the employee was earning when he or she left—not at the wage he or she might have been earning when it was accrued. And the vacation earned is calculated according to the employer’s own policies or contract. So, for example, the employer may legally limit vacation earned during the beginning of the relationship. If you have “advanced” your vacation days by taking them ahead of when they accrued, California law does not permit employers to deduct them from your final check.

We believe this arrangement is nothing but fair. After all, if your vacation is “earned,” the employer should not be able to take it away from you later. In our practice as wage and hour attorneys, we speak to many clients who report feeling pressured to avoid taking any vacation days. California’s law makes it no more profitable to deny vacation in this way, encouraging employers to allow workers to take the vacation they’ve earned.

Unfortunately, not every employer gets the picture. Even though state law is clear, some employers fail to pay for unused vacation, or fail to carry over earned vacation from year to year. Even worse, employers sometimes retaliate against employees who bring the problem to their attention. Retaliation is prohibited by law, however, and employees who are fired, demoted or otherwise retaliated against may be entitled to additional monetary damages.