Under California law, employees have no legal right to vacation pay. As such, employers do not have to provide their employees with any vacation pay.
While employers do not have to provide their employees with vacation pay, it is standard practice for employers to do so. Employers often grant employees vacation pay by way of the employer's policies and practices, an employee's employment contract, or a collective bargaining agreement.
If an employee is awarded vacation pay by their employer, then the employee is entitled to receive that vacation pay. This means that if an employee is terminated and has unused vacation pay, the employer must pay the employee all of their vacation pay.
Importantly, the employer must pay the employee for their vacation pay at the employee's final rate of pay. Thus, even if an employee earned their vacation pay over a number of years, perhaps while earning a lower wage, upon the employee's termination, the employee must be paid their vacation pay at their final wage.
Once an employee is given vacation pay, an employer cannot then take that vacation pay away from an employee. Such a “use it or lose it” policy with respect to earned vacation pay is impermissible. However, it is permissible for an employer to place a cap on the amount of vacation pay that an employee can accrue. For example, it would be acceptable for an employer to prevent an employee from earning additional vacation pay if the employee has reached a certain amount of earned, unused vacation pay.
You can contact our employment attorney in Los Angeles, CA at (424) 284-1384.