Vacation Payout in California is Mandatory but Offering Vacation Isn’t

This might sound contradictory at first. Why would you have to pay out vacation if you don’t even have to offer vacation to begin with?

The answer is that if you choose to offer vacation, you have to follow some rules. You don’t actually have to offer vacation in California at all if you don’t want to (although, it is a perk that employees find desirable so maybe you should!) but if you do decide to implement some vacation benefits, you’ve got to stick to it till the end.

Here’s why:

In California, earned vacation time is part of an employee’s wages. Just as you cannot decide to cut wages without warning, you can’t cut vacation either.

“Vacation pay accrues (adds up) as it is earned, and cannot be forfeited, even upon termination of employment, regardless of the reason for the termination.” From the State of California website

An exception can be made if the employer put a reasonable cap on the accrual of vacation time or if a Collective Bargaining Agreement (negotiated between a Union and the employer) was signed.
To read the full FAQ on the subject of vacation time at the State of California website click here.


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