What Happens To Your Vacation Pay When You Quit/ Are Fired | ASM Lawyers
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What Happens To Your Vacation Pay When You Quit/ Are Fired

Vacation pay is a perk many companies use to attract good employees, but what happens when you haven’t used all your days off at the time that you are fired or quit? Here is what you need to know.

How Vacation Pay Or PTO Treated

In California, paid time off, vacation pay, floating holidays, and personal days are considered something an employee earns, just like your wages. In fact, it’s the law that you can trade your vacation days for money. Since you earned it, the employer owes it to you. The company just hasn’t paid you yet if you haven’t used your time or cashed it in. 

What This Means For Your Final Paycheck

According to the California Labor Code Section 227.3, if your employer provides vacation pay as part of your compensation package than the entity must pay you whatever vacation pay you haven’t used at the time that you stop working for them. This pay must be at your final rate, i.e the rate that you are paid for vacation days at your current position. Your employer has to pay you on your last day of work if you gave at least 72 hour notice, though in some circumstances, such as seasonal work, they have up to 72 hours after your last day to pony up the money. All this holds true whether you are quitting and moving onto greener pastures, or if you are being fired.

If you work for the state, you can elect to have that money put into your 401(K) or other state-sponsored supplemental retirement plan, but you have to write to your employer at least five days before your last day and be terminated after November 1st.

Exceptions And Caps

There are a couple of things to keep in mind when looking at your final paycheck. No company is required to provide paid vacations, and when they do, they are allowed to cap the vacation time that you can accrue. A pretty conservative cap, is 1.75 times the amount of the annual accrual rate. Since this is considered earned, the pay can be prorated to the amount you have earned within the time that you have worked. For instance, if your company gives 2 weeks of paid vacation in a year, and you leave the company after working there for six months without taking any PTO or paid vacation time, they owe you pay for one week of vacation.

The exception that is written into the labor code is in the case of a collective-bargaining agreement. If your work contract provides a certain type of severance package regarding vacation pay, then your company will follow that arrangement. 

It’s important to remember that vacation pay or PTO is wholly separate from sick leave. Sick leave is mandatory, is accrued over time at the rate of 1 hour per 30 hours worked, and can be capped out at 6 days or 48 hours per year. The biggest difference is that you are not given the money for any unused paid sick leave that you have when you end your employment with a company. If you get rehired, the company must reinstate your accrued sick leave, but it can’t be cashed out.

When To Call A Lawyer

If your employer provides paid vacations, then they have to pay you any unused vacation wages when you stop working with them. They are not allowed to apply ‘use it or lose it’ policies, where you have to use your vacation time for the year or you will lose it. 

Aiman-Smith & Marcy is a boutique law firm that specializes in employment law, as well as consumer protection and class-action lawsuits. When you have questions about your last paycheck and whether you are getting all the vacation pay that is due to you, we can help. Contact us for more information.