California: Employers May Prohibit Employees From Earning Vacation in Their First Year

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July 28, 2017

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Although California does not require an employer to provide employees with vacation benefits, employers who elect to do so are obliged to pay attention to a host of regulations.  For example, California forbids employers from causing employees to forfeit earned vacation time (e.g., by way of “use it or lose it” policies), because vacation benefits are considered a form of vested wages.  In a recent case, however, a California Court of Appeal stated that employers may prohibit employees from earning any vacation in their first year of employment, provided that the vacation policy is properly worded.

In Minnick v. Automotive Creations, Inc., the company’s policy stated that employees would not earn any vacation during their first year of employment.  Upon completion of the first year an employee was eligible to take one week of time off; and after completion of two years an employee would accrue up to two weeks.  In this case, the plaintiff was separated after six months; in accordance with company policy, he did not receive any vacation payout upon separation. The Court of Appeal stated that the employer’s vacation policy did not cause any unlawful forfeiture of earned vacation, in part, because the policy clearly and explicitly stated that employees did not earn or accrue vacation during the first year.

Even though this practice is approved, there are a host of other rules related to when an employee earns or accrues vacation time that employers must carefully consider before crafting such a policy.

Action Items

  1. Review the California DIR’s FAQ on vacation time here.
  2. Have vacation policies reviewed for compliance.
  3. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2017 ManagEase, Incorporated.

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