Legal and Practical Issues for Unlimited Vacation Policies in California

The Trend of Unlimited Vacation Policies | California Employment Law

Most businesses used to offer employees vacation time based on the number of months or hours they worked. A common example for starting employees is one week off for every six months worked. In California, vacation time was required to be accrued. This meant there was no – use it or lose it policy. Workers could carry over vacation time from year to year.

Workers who left the company or were terminated were entitled to be paid for the vacation days they earned that weren’t used. The requirement to carry over vacation time from year to year and pay for unused time is because California considers earned vacation time as “vested.”

As technology, work schedules, and other factors have changed with the times – so have vacation policies.  A new trend has emerged where employees can take as much paid vacation time as they like – provided their supervisor or boss signs off on the time. One of the prime reasons for the switch is that employers, because so many employees work away from the office now, are being judged more on performance and how many goals they meet – rather than by the number of hours they work.

There are many things both employers and employees need to understand with the switch to untracked vacation time. For example, employees should know that when they leave the company, they will not be paid for accrued vacation time – because there won’t be any accrued vacation time. Employers generally favor the switch to flex vacation schedules because many employees don’t use all their accrued vacation time before they leave. If employees don’t get paid for accrued vacation days, the employer saves a lot of money. Employers are required to inform new employees of the new unlimited vacation policy and to inform current employees the exact time and manner of the switch.

The legal requirements for how new flex vacation policies should be implemented and enforced is not currently clear. There are likely to be court cases as to how new unlimited/untracked vacation policies should be interpreted.

Some legal issues that the new unlimited vacation policy presents

Employers, employees, and the courts will likely need to analyze the following related vacation time work issues and questions:

  • Do employees forfeit their right to be compensated for vacation time they could have rightfully asked their supervisor for? While the right to unlimited vacation time sounds great in theory. In practice, many employers may likely grant the right based on the time the employee has been with the company.
  • Can the employer place caps on the number of possible vacation days an employee can take?
  • How much consideration should be given to whether the employee can really use the vacation days – as opposed to having to do a lot of work while theoretically on vacation?
  • Is it fair to essentially punish employees (by paying them for fewer days) who work instead of taking time off?
  • How much can the employer force a hard-working employee to take a vacation?
  • Is the new vacation policy being implemented as just a variation of the old accrual policy – in which event employees should be paid for their vacation days. Or is the new employer vacation policy substantially different from the old vacation method?
  • How should the transition from the old vacation policy to the new one be implemented so that employees who have accrued vacation pay are fairly paid for their work?
  • How would the employee file a claim and prove his/her case?
  • Many other related questions.

What remedies should be available?

Does the new policy violate California’s Labor Code? On what basis should additional damages be awarded such as interest on the unpaid amounts and statutory damages? Are legal fees available if the employee’s claim for lost earned vacation days is granted? Under the current Labor Code laws, employers could be penalized large sums of money.

The law on unlimited vacation policies is evolving. Both employers and employees need to understand their rights. For help learning how these new flex time vacation policies affect you, call Stephen Danz & Associates. You can reach us at 877-789-9707 to schedule an appointment.