Many of our individual and class action cases deal with unpaid vacation wages. Amazingly, California law with respect to vacation pay is simple, but many California employers fail to pay vacation wages according to law. Here is at law: A California employer does not have to provide vacation pay to its employees. However if it does provide vacation pay to employees, it must do so properly. That means that it must allow employees to accrue vacation incrementally, or provide them with a lump amount of vacation days to use every year. An employer may not have a “use it or lose it” vacation policy, meaning that vacation pay is lost at the end of every year. However an employer may have a cap on accrual, meaning that employer can set a maximum amount of vacation days that an employee may accrue at any given time. All of your vacation wages must be paid a termination or resignation, and they must be paid at your final rate of pay. An employer may not reduce your rate of pay at the end of your employment in order to reduce the amount of vacation pay the employer pays you. It is illegal for an employer to not pay all accrued vacation wages on your last day of employment if you are terminated or within three days of your last day of work if you resign and don’t give three days advanced notice. The failure to timely pay all accrued vacation wages can trigger a penalty up to 30 days of pay.
Here is an example of a typical vacation wage claim. Say an employer gives its employees two weeks of vacation a year, and employees accrue that vacation incrementally from day one until the end of the year. If an employee does not use any vacation days, that employee has, by the end of the year, two weeks of vacation pay due to him. The employer can choose to pay out vacation at the end of the year, or allow the unused vacation days to roll over to the next year.
But let’s also say that the employer has a policy that no one can accrue more than three weeks of vacation at any one time. If another year passes and the employee does not use any of his vacation pay, that employee will cap out at three weeks of vacation pay. He would not be able to accrue vacation anymore until he uses some of the three weeks of vacation that he had already accrued.
Finally, let’s have the hypothetical employee resign (giving two weeks of notice before quitting) when he has 40 hours of accrued vacation pay. His hourly rate of pay is $20 per hour. His employer must have a check waiting for him on his last day of work for the full amount of his accrued vacation wages, which comes out to $800. (The employer can make a direct deposit of the funds on that day too.) If the employer pays out the $800 on the employee’s last day of work, there is no violation of law. But if the employer either fails altogether to pay the $800 or pays less than $800 or delays in making payment, there has been a violation of California’s vacation wage laws. For each day that the full $800 remains unpaid, up to a maximum of 30 days, a penalty of one day of wages will accrue under California Labor Code section 203.
If you have questions about vacation wage claims, please feel free to contact Strauss & Strauss, APC using the contact form on this page. Or call us at (805) 641-6600.