A California Employer Advisor reader asks:
Our company policy gives employees their actual birthday off with pay. A birthday that falls on a Saturday, Sunday, or holiday will be taken on the preceding or following workday. Subject to a supervisor’s approval, employees may take another day off, but it must be within one week of the employee’s actual birthday. Birthday benefits may not be carried over to the following year and are not paid at the time of termination.
If an employee doesn’t take the paid birthday time off, do we have to roll over the unused birthday time from year to year, or pay it out at termination, like with vacation benefits?
The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state’s complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.
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Under the policy you describe, any unused paid birthday benefit does not have to be rolled over or paid out.
Under longstanding policy of the California Division of Labor Standards Enforcement (DLSE), “vacation” time is any paid time off benefit that employees can use as they see fit, without any employer-imposed conditions. Once earned, vacation benefits can never be forfeited, and unused benefits must be either rolled over from year to year (subject to a reasonable cap), or paid out to the employee.
This is the reason that if your company has a PTO (Paid Time Off) policy that combines vacation and sick leave into a lump sum benefit, you have to roll over all earned PTO time or pay it out. In contrast, if employees earn vacation and sick leave benefits separately, then the sick leave benefits do not have to be rolled over or paid out because sick leave is provided for a specific purpose (an employee’s illness).
Similarly, if you award certain paid time off benefits—such as paid holidays—that are for a specific purpose, or tied to a specific event and have to be used within a close time frame to that event, then that time does not have to be treated the same as earned vacation time.
Paid holidays are a great way for employers to offer employees additional benefits without incurring significant costs. Just make sure that you don’t allow employees to “bank” paid holiday time to be used later at the employee’s discretion. If you do, the paid holiday time will convert to vacation time and will have to be treated accordingly.
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