Most people are familiar with the term paid time off or PTO. However, we know that many individuals may not quite understand the laws surrounding PTO in California. In this state, we need to point out that employers are not required to provide any paid vacation or PTO for their employees. That being said, a growing number of employees in the state are beginning to realize the benefits of various types of time off for their workers. Here, our Orange County employment attorneys discuss the guidelines that employers do have to follow if they choose to offer paid time off or vacation days to their employees.
Just because employers are not required to provide time off does not mean that there are no regulations so those who do offer this time. Employers who choose to offer vacation and paid time off need to be aware that California law considers accrued vacation to be a form of wages that have already been earned by the worker. This means that any accrued paid time off or vacation days cannot expire, and they have to be paid out to an employee if the employee leaves the job (whether through termination or any other type of separation).
Under California regulations, sick leave is not considered the same thing as PTO or vacation days. In this state, all employers are required to provide a minimum number of paid sick days each year to their workers.
When employers do offer vacation time or pay time off, this will typically accrue over time as the employee works for the employer. For example, if the company has paid time off or vacation policy that gives the employee 10 days vacation or PTO each year, the employee will have accrued five of those days after they have been employed for six months.
Employers in this state are allowed to designate waiting periods at the beginning of a person’s employment before their PTO or vacation time accrues. This waiting period can range anywhere from 30 days up until a year into employment.
As strange as it may sound, employers are also allowed to give groups of employees paid time off or vacation days, but not other groups. The employer can do this so long as they do not discriminate based on protected classes, including race, gender, sexuality, disability status, etc. For example, it is perfectly acceptable for employers to give vacation and PTO only to full-time employees or only supervisors.
In California, this is not a “use-it-or-lose-it” state when it comes to vacation or PTO. Under those types of policies, accrued vacation or PTO must be used by a certain date, typically by the end of the year. Failure to do so would result in the time being forfeited. Because PTO and vacation accrual will be considered earned wages, the “use-it-or-lose-it” policies will not be legal in this state because this will be seen as withholding wages.
However, employers in the state can place caps on how much vacation or PTO can be accrued. For instance, after an employee reaches a certain number of days, they would stop accruing additional time. There is no set number for a permissible cap in California, though the Department of Labor Standards Enforcement (DLSE) has previously said that the vacation and PTO cap should be no less than 1.75 times the annual accrual rate. Even though the DLSE has withdrawn this rule, it is generally accepted that the 1.75 cap is likely the safest ratio for employers to abide by.