When an employer offers unlimited vacation policies, employees must truly have the right to unlimited vacation in order for an employer to avoid paying for unpaid vacation time. A recent case highlights how to tell whether your employer violated your rights.
California has employment laws that provide extensive protections for employees, one of which is to provide employees with compensation for unused vested vacation time. For example, if you earned three weeks of vacation time while you were working, but you only used two weeks, your employer should pay you for the one week of unused vacation time you had remaining.
Many employers try to find ways to avoid paying for unused vacation time to former employees. One tactic is to develop unlimited vacation policies, which do not require payment for unused time, in addition to having other benefits. However, some companies have misused a so-called unlimited vacation policy and, as a result, violated the rights of employees. If you think your employer might have violated your rights, contact our California unpaid vacation lawyers for help.
California Labor Code Section 227.3 mandates that paid vacation time that an employee earned but did not use is considered to be wages to be paid on the employee’s final paycheck. This law only applies to traditional vacation policies, however, in which employees can accrue up to a certain amount of paid time off (PTO).
Many employers have been switching to unlimited vacation policies in recent years, however, as they give employees greater flexibility and relieve administrative burdens from employers. Under these policies, employees are trusted to take PTO when they need to, as long as their job duties allow it. Employees do not accrue vacation time as they work, so it is different from having a bank of vested vacation time to be used at a later time. Because there is no vested vacation time, there is nothing to pay out for unused time upon an employee’s departure.
In a recent case, the California Court of Appeals ruled on how the Labor Code might or might not apply to unlimited PTO policies. In the case, an employer stated it had an unlimited vacation policy, but it was never put in writing or communicated in that manner to the employees. The employees believed they were limited to six weeks of vacation per year, though this was never formalized.
The employees filed a claim for unpaid vested vacation time, and the Court of Appeals found the employer’s policy was not truly unlimited but instead, undefined. Leaving a vacation policy undefined does not relieve employers of their obligations under the Labor Code to pay for unused vacation time. In order for employers to avoid such payment, their unlimited policies should be in writing and make clear that the unlimited vacation is not intended to be a form of wages or compensation. Companies should also administer such policies fairly and in accordance with the spirit of the policy, such as by not discouraging employees from using PTO.
At Mara Law Firm, we help employees with a wide range of labor law claims, and you should not wait to call (619) 234-2833 or contact us online to learn how a California unpaid vacation attorney can help.
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