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September 26, 2023 | CaliforniaEmployment

When Must California Employers Pay Their Employees for Unused Paid Time Off?

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Jari Wilson

Associate Attorney

Getting paid for sick, personal or vacation days is a valuable employee benefit.  California provides employees living in the state with the right to paid time off (PTO) under its paid sick leave acts.  While the state does not require paid vacation days, it does place some restrictions on employers who provide employees with vacation days.  Understanding these restrictions, among other relevant employment statutes in California, is paramount to knowing your rights as an employee and your requirements as an employer in the state.

Is Paid Time Off Required In California?

California law differentiates between sick leave and vacation time.  The state mandates that employers provide at least 24 hours of paid sick leave to California employees each year.

Paid or unpaid vacation time, on the other hand, is not mandated by the state.  However, if an employer chooses to provide employees with paid vacation time, then the employee is entitled to compensation for unused paid vacation days.

When Are Employers Required to Pay Out Unused Paid Time Off?

If a California employer chooses to provide employees with paid vacation time, the state considers this PTO equivalent to an employee’s wages.

While the employee has a right to be paid for unused paid vacation days, the employer is also provided with some ways to place limitations on how employees use their paid vacation days.

Under California law, an employer who provides paid vacation days is allowed to:

  • Limit paid vacation time to certain classes of employees, such those who are full-time;
  • Prohibit employees from rolling over unused vacation PTO to the next year;
  • Place a cap or ceiling on how much vacation time can be accrued; and
  • Manage when employees can use vacation time and how many days can be used in any given time.

However, employers should be aware that if they choose not to allow employees to roll over unused vacation PTO to the next year, employees cannot lose the balance of accrued vacation time.  Instead, the employers will have to pay the employees for the unused vacation time.

How Does Quitting Vs. Being Terminated Affect The Right To Be Paid Out For Unused Time?

Because paid vacation time is considered earned wages in California, there is no distinction between an employee quitting or being terminated.  If the leaving employee has unused vacation time, then the employer must include the payment for the unused time off in the employee’s final paycheck.  One thing to note is that if the employee used paid vacation time before it was earned, the employer may not deduct this time from the employee’s final paycheck.

How Should Employers and Employees Handle Disputes Over Paid Time Off?  

Both parties should review the company’s policies, contracts and practices regarding paid time off.  This is important as there may be limitations on when monies are owed and what procedures must be followed.  If either party fails to comply, it will have an effect on their rights.

To avoid disputes, employers should consult an attorney to draft or review paid time off policies.  This will ensure that they accurately reflect the employer’s wishes regarding paid time off and complies with California law.  Employment contracts and collective bargaining agreements should also be reviewed by an attorney to ensure the employee’s rights are protected. 


If you are involved in a dispute over paid time off or other employee benefits, you should contact a qualified attorney.  Romano Law has broad experience with all types of employment matters including wage disputes, employee handbooks and employment agreements.  From New York to Miami and Los Angeles, our employment attorneys are ready to help.  Reach out to our team to learn more.

Carlianna Dengel is admitted to practice law in New York and California.


Photo by Agefis on Unsplash
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