Vacation Accrual and Cap on Vacation Accrual (PTO) Under (CA) Law

bgoodman

An employer usually has the discretion to determine whether it will offer its employees vacation compensation. However, once paid vacation is offered, it is subject to substantial regulation by the state. See Cal. Lab. Code § 227.3.

California also allows employers to establish a "cap" or "ceiling" on the amount of vacation that an employee can accrue. Kistler v. Redwoods Community College Dist., 15 Cal. App. 4th 1326, 1334 (1993). Once an employee accrues vacation up to the cap, no more vacation will accrue until the employee uses some of the vacation. The cap, however, must be "reasonable." See DLSE Interpretive Bull. No. 86-3 (Sept. 30, 1986). Although reasonable is not defined, a cap at twice an employee's annual vacation would likely be found reasonable by the California Labor Commissioner because it would give an employee an entire year to use his or her accrued vacation before the cap limited further accrual.

According to this, if an employer provides 80 hours of paid vacation, then it would be "reasonable" to cap accrual at 160.

But if the employer provides 80 hours of paid vacation and caps the accrual at 80, does that violate the law? the DLSE Interpretive Bull.? CA public policy?

Would DLSE Interpretive Bull. No. 86-3 view a cap of 80 as UNREASONABLE?

Thanks for your help in advance.

Gillian

Also in California and I don't know. My feeling is that the cap would not be viewed as reasonable because it doesn't provide the flexibility that caps allow. What you have is nothing more than a take your vacation in a timely way, or they fail to accrue more. I haven't heard of a case where this issue has been challenged, so perhaps you get to be a test case in the event of a claim. On the other hand, you could do what we are doing, changing our policy. It is currently like yours for non-exempt employees and we are changing it to be the same as for exempt, a more enlightened approach to employee relations.

bgoodman

Thank you for your comments.

Carol CA

I'm also in California and agree that placing a cap at the same amount as the accrual rate could be viewed as a "use it or lose it" policy. What we have done is set the accrual rate at 40 hours (1 week) beyond their normal accrual rate. So a new employee who accrues at 80 hours would get to accrue up to 120 hours before they hit their cap. Someone who has been with the company over 10 years and accrues at 160 hours could accrue up to 200 hours before they hit their cap. This has worked well for us and has been easy to administer.