Paying out vacation upon resignation to CA employee

Evswife · August 2005

Do we have to pay out unused vacation time to an employee in California who has resigned according to our policy that she has earned, but would not be eligible to take until her anniversary date? In other words, this employee earned and is able to take the time she accrued on her one year anniversary last month, which I know needs to be paid out, but now that it is two months after her anniversary date, do we also owe her for a prorated amount that she is earning, but not able to take yet? In Illinois, this is the law, so I am wondering if CA is the same way? Anyone know? I would greatly appreciate it, as the DOL in CA is very difficult to get ahold of! Thanks.

HR in CA · August 2005

Yes

In the past we had to pay many employees their accrued but unused vacation before they were even eligible to take it. We revised our policy so employees do not begin accruing vacation until they have worked for us 6 months. This change saved us at least $5,000 per year.

The California Labor Commissioner's office is a great resource to call with questions. Their number is (916) 263-1811.

Good luck!

Gillian3 · August 2005

HR in CA is correct, but with one comment. Just saying that vacation does not accrue until after the introductory period or some other definition does not make it automatic. There must be a true "no accrual" period. If vacation is one week after one year, for example, and the policy says no accrual until after 90 days, a true "no accrual" period would mean that the employee would get 3/4 of one week for the nine months ending with the day before the employee's anniversary date. The state would view the alternative, to allow one week after the year, as just a backdating of the accrual and that the policy is a "subterfuge" to avoid payment for the 90 days.

HR in CA · August 2005

Thanks for commenting on that, I forgot to include that. Yes, ours is a true no accural for 90 days.

Beckie

E Wart · August 2005

This may depend upon how your policy reads. The CA law says "all vested paid vacations provided for by a contract of employment or employer policy that are not yet taken on terminaiton must be paid to the employee as wages at his/her final rate. The right to a paid vacation constitutes deferred wages for services rendered, and a proportionate part of the vacaiton time becomes vested throughout the employment period."
Is your vacation time "accrued or earned". I think that might be what needs to be cleared up and when employee actually is eligible for the time.
E Wart

atrimble · August 2005

Could specifying in a personnel policy that vacation is *earned* and sick leave is *accrued* be enough (semantically) to justify not pay sick leave on termination, if the issue was taken to court?

Missouri courts are starting to treat all paid time off as earned property. It looks to me like the judiciary is trying to legislate employment law, by forcing employers to use one lump or pool of paid time off. Why have another system if the courts are going to make you treat all leave the same?

-Abby

Gillian3 · September 2005

No, the mandatory pay off only applies to vacation, floating holidays, personal days and any other non-scheduled time that is a benefit to the employee. It does not include sick leave. PTO is probably used less in Ca. then other states because then all leaves become subject to mandatory pay off.

Paying out vacation upon resignation to CA employee

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