What’s the Deal on Vacations, PTO, and Sick Leave?

Updated May 27, 2023

Employee Vacations

A California employer must pay an employee for unused, accumulated vacations and personal leave (to be calculated on a daily pro rata basis) upon termination if the employment contract or employment policy established paid vacation or personal leave. A “use it or lose it” policy is not permissible.

An employer may not require a new employee to work a specified number of days or reach an anniversary date before using earned vacation or personal leave.

An employer may limit the number of consecutive days of vacation taken and control the scheduling of vacation days. Additionally, an employer may limit total accrued vacation hours by compensating employees as vacation time accrues or by setting a limit on the amount of vacation time that can be accrued. These limitations must be expressly stated by an employer.

There is no legal requirement in California that an employer provide its employees with either paid or unpaid vacation time.

Paid Time Off (PTO)

Paid time off (PTO) refers to employer developed programs that consolidate vacation and sick leave into one. There is no California law that requires employers to implement this benefit program. However, when implemented, like vacation time, a “use it or lose it” policy is not permissible as the unused time “vests” throughout the employee’s term of employment.

Sick Leave

California law does not require an employer to pay accumulated sick leave on termination. California does require an employer to allow an employee to use up to one-half of accrued sick leave to care for a family member.

In California, the rules regarding sick pay are governed by the Healthy Workplaces, Healthy Families Act of 2014. This law requires employers to provide paid sick leave to their employees. Here are the key points to know:

Accrual of Paid Sick Leave: Employees in California generally accrue paid sick leave at a rate of one hour for every 30 hours worked. This includes part-time, full-time, temporary, and seasonal employees.
Usage of Paid Sick Leave: Employees can use their accrued sick leave for their own illness, injury, or health condition or for the care of a family member (such as a child, parent, spouse, registered domestic partner, grandparent, grandchild, or sibling) who has a health condition or needs medical care.
Usage Waiting Period: Employees are entitled to begin using their accrued sick leave on the 90th day of employment. However, employers may allow employees to use accrued sick leave before the 90th day.
Carryover and Accrual Caps: Accrued but unused sick leave must carry over from year to year. However, employers can impose a reasonable cap on the total amount of accrued sick leave an employee can have at any given time. The cap is either 48 hours or 6 days (whichever is greater).
Notification and Documentation: Employers can require employees to provide reasonable advance notice of the need to use sick leave, but only if it is feasible. Employers can also require reasonable documentation of the need for sick leave, but only for absences of more than three consecutive days.
Rate of Pay: Paid sick leave must be paid at the employee’s regular rate of pay. If the employee has different rates of pay, the sick leave is calculated based on the average rate over the previous 90 days.
Anti-Retaliation: Employers are prohibited from retaliating against employees who request or use paid sick leave. Employees have the right to file a complaint with the California Labor Commissioner if they believe their rights have been violated.

It’s important to note that some cities in California have their own sick leave ordinances that may provide additional benefits to employees. Employers must comply with both state and local sick leave laws, and they must follow whichever law is more generous to employees.

Do we have to pay employees when we close our business for holidays?

There is no federal or state labor law that requires employers to pay for holidays.

And there’s no requirement that you have to offer time and a half if employees are going to come in and work; it is all dictated by company policy. We recommend employers include their holiday pay policy as part of an employee handbook, a company-wide memo, and/or an offer letter. The bottom line is that it’s up to each employer.

If you’re unsure how you’re affected or have HR questions, please do not hesitate to reach out. Be sure to sign up for our newsletter so you’re kept up-to-date of any changes. 👇