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Vacation
There is
no legal requirement in California that an employer provide
its employees with either paid or unpaid vacation time. However,
if an employer does have an established policy, practice, or
agreement to provide paid vacation, then certain restrictions
are placed on the employer as to how it fulfills its obligation
to provide vacation pay. Under California law, earned vacation
time is considered wages, and vacation time is earned, or vests,
as labor is performed. For example, if an employee is entitled
to two weeks (10 work days) of vacation per year, after six
months of work he or she will have earned five days of vacation.
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. (Suastez v. Plastic Dress
Up (1982) 31 C3d 774) An employer can place a reasonable
cap on vacation benefits that prevents an employee from earning
vacation over a certain amount of hours. (Boothby v. Atlas
Mechanical (1992) 6 Cal.App.4th 1595) And, unless
otherwise stipulated by a collective
bargaining agreement, upon termination of employment all
earned and unused vacation must be paid to the employee at his
or her final rate of pay. Labor
Code Section 227.3 The Califonia Legislature, in order
to ensure that vacation plans were fairly and equitably handled,
provided that the Labor Commissioner was to "apply the principles
of equity and fairness" in resolving vacation claims.
Q-1.
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My
employer’s vacation plan states that no vacation is earned
during the first six months of employment. Is this legal? |
Ans.
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Yes. DLSE’s enforcement
policy does not preclude an employer from providing
a specific period of time at the beginning of the employment
relationship during which an employee does not earn
any vacation benefits. This could apply to a probationary
or introductory period, and can even apply to the whole
first year of employment.
Such a provision in a vacation plan will only be recognized,
however, if it is not a subterfuge (phony reason) and
in fact, no vacation is implicitly earned or accrued
during that first year or other period. For example,
a plan with the following provisions would be an obvious
subterfuge and not regcognized as valid
Year 1: No
vacation
Year 2: 4
weeks vacation
Year 3: 2
weeks vacation
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The four weeks’ vacation
earned in the second year, when viewed in the context
of the two weeks’ vacation earned in the third year,
makes it clear that two of the four weeks earned in
year two are actually vacation earned in year one.
A valid vacation plan could look like the following:
Year 1: No
vacation
Year 2: 2
weeks vacation
Year 3: 3
weeks vacation
Years 4 through 10: 4 weeks vacation
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In
those instances where a "waiting period" (Year 1 in the
examples above) is found to be a subterfuge, employees
who separate from their employment during the "waiting
period" will be entitled to prorated vacation pay at their
final rate of pay. On the other hand, where the employer’s
vacation plan has a valid "waiting period" provision,
employees who separate from their employment during that
period will be ineligible for any vacation pay. |
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Q-2.
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How
is vacation earned? |
Ans.
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In California, because
paid vacation is a form of wages, it is earned as labor
is performed. An employer’s vacation plan may provide
for the earning of vacation benefits on a day-by-day,
by the week, by the pay period, or some other period
basis. For example, an employer’s policy may provide
that an employee will earn a proportionate share of
his or her annual vacation entitlement for each week
of a calendar year in which the employee either works
at least one full day or receives at least one full
days’ pay during such week. Thus, for example, if an
employee is entitled to two weeks (10 work days) annual
vacation, and works full-time, eight hours per day,
40 hours per week, in the above example for each week
the employee works at least one full day, he or she
will earn 1.538 hours of paid vacation, calculated as
follows:
10 work days entitlement
per year x 8 hours/day = 80 hours vacation entitlement
per year
80 hours vacation entitlement per year ¸ 52 weeks
per year = 1.538 hours of vacation earned per
week
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In
contrast to how vacation pay may be earned, the calculation
of vacation pay for terminating employees (a quit, discharge,
death, end of contract, etc.) who have earned and accrued
and unused vacation on the books at the time of termination
must be prorated on a daily basis and must be paid at
the final rate of pay in effect as of the date of the
separation. For example, an employee who is entitled to
three weeks of annual vacation (15 work days entitlement
per year x 8 hours/day = 120 hours vacation entitlement
per year) who quits on August 7, 2002 (the
219th day of the year) without having taken
any vacation in 2002, who has no vacation carry-over from
prior years, and whose final rate of pay is $13.00 per
hour, would be entitled to $936.00 vacation pay upon separation,
calculated as follows:
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Pro rata daily basis:
219 days (August
7, 2002, date of quit) ¸ 365 days/year = 60%
60% of 120 hours
vacation entitlement = 72 hours vacation earned
and accrued through August 7, 2002
Vacation days used
in 2002 = 0
Vacation earned
but not taken at time of separation = 72 hours
72 hours x $13.00/hour
= $936.00 vacation pay due at separation. |
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Q-3.
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I
am a part-time employee, and am excluded from my employer’s
vacation plan (only full-time employees get vacation).
Is this legal? |
Ans.
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Yes, it is legal. If an
employer’s vacation plan/policy excludes certain classes
of employees, such as part-time, temporary, casual,
probationary, etc., such a provision is valid, and the
agreement will govern. To avoid any misunderstandings
in this area, the vacation plan/policy should state
clearly and specifically which employee classification(s)
are excluded.
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Q-4.
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My
employer’s vacation policy provides that if I do not use
all of my annual vacation entitlement by the end of the
year, that I lose the unused balance. Is this legal? |
Ans.
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No,
such a provision is not legal. In California, vacation
pay is another form of wages which vests as it is earned
(in this context, "vests" means you are invested or endowed
with rights in the wages). Accordingly, a policy that
provides for the forfeiture of vacation pay that is not
used by a specified date ("use it or lose it") is an illegal
policy under California law and will not be recognized
by the Labor Commissioner. |
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Q-5.
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My
employer’s vacation policy provides that once an employee
earns 200 hours of vacation, no more vacation may be earned
(accrued) until the vacation balance falls below that
level. Is this legal? |
Ans.
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Yes, such a provision
would be acceptable to the Labor Commissioner. Unlike
"use it or lose it" policies, a vacation policy that
places a "cap" or "ceiling" on vacation pay accruals
is permissible. Whereas a "use it or lose it" policy
results in a forfeiture of accrued vacation pay, a "cap"
simply places a limit on the amount of vacation that
can accrue; that is, once a certain level or amount
of accrued vacation is earned but not taken, no further
vacation or vacation pay accrues until the balance falls
below the cap. The time periods involved for taking
vacation must, of course, be reasonable. If implementation
of a "cap" is a subterfuge to deny employees vacation
or vacation benefits, the policy will not be recognized
by the Labor Commissioner.
In defining "reasonable"
in this context, the Labor Commissioner has taken the
position that a worker must have at least nine months
after the accrual of the vacation within which to take
the vacation before a cap is effective. This "reasonable"
time allows an employee to take fully vested vacation
at times convenient to both the employee and employer
without forcing an employer to accrue a large vacation
pay (or time) liability. |
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Q-6.
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Can
my employer tell me when to take my vacation? |
Ans.
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Yes, your employer has
the right to manage its vacation pay responsibilities,
and one of the ways it can do this is by controlling
when vacation can be taken and the amount of vacation
that may be taken at any particular time.
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Q-7.
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My
employer’s vacation policy provides that if I don’t use
all of my vacation by the end of the year, he will pay
me for the vacation that I earned and accrued that year,
but did not take. Is this legal? |
Ans.
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Yes, your employer has
the right to manage its vacation pay responsibilities,
and one of the ways it can do this is by paying you
off each year for vacation that you earned and accrued
that year, but did not take.
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Q-8.
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My
employer has combined its vacation and sick leave plans
into one program that it calls "paid time off" (PTO).
Under this program I have a certain number of paid days
each year that I can take off from work for any purpose.
Does this allow my employer to circumvent the law as it
relates to vacations? |
Ans.
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No,
a "paid time off" (PTO) plan or policy does not allow
your employer to circumvent the law with respect to vacations.
Where an employer replaces its separate arrangements for
vacation and sick leave with a program whereby employees
are granted a certain number of "paid days off" each year
that can be used for any purpose, including vacation and
sick leave, the employees have an absolute right to take
these days off. Consequently, again applying the principles
of equity and fairness, DLSE takes the position that such
a program is subject to the same rules as other vacation
policies. Thus, for example, the "paid time off" is earned
on a day-by-day basis, vested paid time off days cannot
be forfeited, the number of earned and accrued paid time
off days can be capped, and if an employee has earned
and accrued paid time off days that have not been used
at the time the employment relationship ends, the employee
must be paid for these days. |
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Q-9.
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My
employer allows its employees to take their vacation before
it is actually earned or accrued. Last month I took my
three weeks vacation before I had actually earned all
of it. I quit my job this month and my employer deducted
all of the unearned vacation days that I had taken from
my final paycheck. Can he do this? |
Ans.
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No, your employer cannot
deduct "advanced" vacation (i.e., vacation that is taken
before it is earned or accrued) from your final paycheck.
Because of work schedules and the wishes of employees,
many employers allow employees to take their vacation
before it is actually earned. Under California law,
vacation benefits are a form of wages, and an employer's
practice of allowing employees to take their vacation
before it is actually earned or accrued is in effect
an advance on wages. Thus, if an employee takes
an advance on vacation and then quits or is discharged
before all of that advanced vacation is earned or accrued,
the effect is that there has been an overpayment of
wages which is a debt owed to the employer.
The California courts have noted on a number of occasions
that an advance on wages, as with any other debt owed
(either to the employer or a third party), is subject
to the provisions of the attachment law. However,
since wages are exempt from prejudgment attachment,
neither the employer nor any third party can recover
the debt by way of attachment of the employee's final
pay, as to do so would violate the public policy considerations
underlying the wage exemption statutes. Thus,
in California since the wage garnishment law provides
the exclusive judicial procedure by which a judgment
creditor can execute against the wages of a judgment
debtor, an employer may not resort to self-help to recover
debts owed to the employer by an employee from the wages
then due to the employee.
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Q-10.
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What
happens to my earned and accrued but unused vacation if
I am discharged or quit my job? |
Ans.
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Under
California law, unless otherwise stipulated by a collective
bargaining agreement, whenever the employment relationship
ends, for any reason whatsoever, and the employee has
not used all of his or her earned and accrued vacation,
the employer must pay the employee at his or her final
rate of pay for all of his or her earned and accrued and
unused vacation days. Labor
Code Section 227.3. Because paid vacation benefits
are considered wages, such pay must be included in the
employee’s final paycheck. |
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Q-11.
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My
employer does not allow employees to carry-over any unused
vacation days from year-to-year. When I was discharged
last week none of these forfeited vacation days were included
in my final paycheck? What can I do? |
Ans.
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You can either file
a wage claim with the Division of Labor Standards
Enforcement (the Commissioner's Office), or you can
file a lawsuit in court against your employer to recover
the lost wages. Additionally, if you no longer
work for this employer, you can make a claim for the
waiting time penalty pursuant to Labor
Code Section 203.
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Q-12.
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What
is the procedure that is followed after I file a wage
claim? |
Ans.
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After your claim is completed
and filed with a local office of the Division of Labor
Standards Enforcement (DLSE), it will be assigned to
a Deputy Labor Commissioner who will determine, based
upon the circumstances of the claim and information
presented, how best to proceed. Initial action taken
regarding the claim can be referral to a conference
or hearing, or dismissal of the claim.
If the decision is to
hold a conference, the parties will be notified by mail
of the date, time and place of the conference. The purpose
of the conference is to determine the validity of the
claim, and to see if the claim can be resolved without
a hearing. If the claim is not resolved at the conference,
the next step usually is to refer the matter to a hearing
or dismiss it for lack of evidence.
At the hearing the parties
and witnesses testify under oath, and the proceeding
is recorded. After the hearing, an Order, Decision,
or Award (ODA) of the Labor Commissioner will be served
on the parties.
Either party may appeal
the ODA to a civil court of competent jurisdiction.
The court will set the matter for trial, with each party
having the opportunity to present evidence and witnesses.
The evidence and testimony presented at the Labor Commissioner’s
hearing will not be the basis for the court’s decision.
In the case of an appeal by the employer, DLSE may represent
an employee who is financially unable to afford counsel
in the court proceeding.
See the Policies
and Procedures of Wage Claim Processing pamphlet for
more detail on the wage claim procedure. |
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Q-13.
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What
can I do if I prevail at the hearing and the employer
doesn’t pay or appeal the Order, Decision, or Award? |
Ans.
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When
the Order, Decision, or Award (ODA) is in the employee's
favor and there is no appeal, and the employer does not
pay the ODA, the Division of Labor Standards Enforcement
(DLSE) will have the court enter the ODA as a judgment
against the employer. This judgment has the same force
and effect as any other money judgment entered by the
court. Consequently, you may either try to collect the
judgment yourself or you can assign it to DLSE. |
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Q-14.
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What
can I do if my employer retaliates against me because
I informed him that in California vacation is wages and
cannot be forfeited? |
Ans.
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If
your employer discriminates or retaliates against you
in any manner whatsoever, for example, he discharges you
because you objected to the fact that your vested vacation
was being forfeited and not carried over from year-to-year,
or because you file a claim or threaten to file a claim
with the Labor Commissioner, you can file
a discrimination/retaliation complaint with the Labor
Commissioner’s Office. In the alternative, you can file
a lawsuit in court against your employer. |
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