Close this search box.

Vacation Payout in California is Mandatory but Offering Vacation Isn’t

This might sound contradictory at first. Why would you have to pay out vacation if you don’t even have to offer vacation to begin with?

Well, if you choose to offer vacation, you have to follow some rules. You don’t actually have to offer vacation in California at all if you don’t want to (although, it is a perk that employees find desirable so maybe you should!) but if you do decide to implement some vacation benefits, you’ve got to stick to it till the end.

In California, earned vacation time is part of an employee’s wages. Just as you cannot decide to cut wages without warning, you can’t cut vacation either.

“Vacation pay accrues (adds up) as it is earned, and cannot be forfeited, even upon termination of employment, regardless of the reason for the termination.” From the State of California website

An exception can be made if the employer put a reasonable cap on the accrual of vacation time or if a Collective Bargaining Agreement (negotiated between a Union and the employer) was signed.
To read the full FAQ on the subject of vacation time at the State of California website click here.

7 Responses

  1. Pingback: Vacation Laws Apply to PTO (Paid Time Off) | The Timesheets Blog
  2. I have recently quit my job for a new one. I had 2 weeks of vacation time paid out to me,but when I received my check I realized they taxed my vacation pay out. Is this legal?

    1. Vacation payout is probably going to be taxed at the 25% supplemental wages rate. You might want to make sure that your entire check was not taxed at this higher rate, though.

  3. Hi Jen, If the vacation was earned at a certain rate, my opinion is that you’d have a pretty strong case to make that you deserve the equivalent amount of vacation in terms of value. So if you had 5 days before, you’d have 6 days now – or something like that. I like your idea, however, to cash those days out at the old rate and start fresh. But either way would be fair.

Leave a Reply

Your email address will not be published. Required fields are marked *

News & Tips for Small Business Owners, Employees, and Accounting Professionals


We Help Thousands of Employers Manage Time, Time Off, and Expenses is trusted by small businesses everywhere as a recognized industry leader