Are California employers required to implement a paid time off (PTO) policy? It may seem so, since paid-time-off banks (as opposed to sick leave banks) are becoming increasingly popular. It may be surprising to learn that California law doesn’t actually require employers to provide PTO, vacation, sick time (with limited exceptions), or even paid holidays.
“California employees are oftentimes under the mis-impression that California requires these types of benefits. The mis-impression that we, as a California employer, are required to give paid vacations, paid sick, paid holidays. I recognize it’s a very entitled view. It’s incorrect, but it’s very common.” Michelle Lee Flores explained in a recent CER webinar. However, it is important to note that if an employer decides to offer vacation time, it cannot be taken away once earned. This is because vacation policies are viewed as contracts and are part of the wages earned. PTO policies are viewed the same as vacation time under California law.
PTO Policy Vs. Vacation/Sick/Holiday Policies in California
Traditional sick time in California is typically used only to address illness or doctor visits of the employee or a family member. As such, it can be allotted and lost at the end of the year. This is one of the rare circumstances where a “use it or lose it” policy is acceptable.
“A vacation policy on the other hand, is viewed and treated very differently in California than sick time. Vacation – paid vacation days – are viewed by the state of California as a form of wages.” Flores explained. This means no “use it or lose it” policies. “Paid vacation days are considered an earned benefit – the same as wages – and therefore the benefits enjoy certain protections that in most other states are different.”
Vacation benefits are time allotted that will be paid out when an employee uses it to take time away from work for their own personal use and enjoyment. While there is no “use it or lose it” option, California employers can stop the earning or accrual of vacation after a maximum level is reached.
Traditional holiday policies, on the other hand, observe specific days off each year – typically designated national or religious holidays. Some employers opt to include additional “floating” holidays in which some personal days can be taken on any day for any reason, yet these are typically implemented as a “use it or lose it” option, which may not be in legal compliance.
A PTO policy is typically a combination of traditional (paid) sick leave, and traditional paid vacation time. It allows for a big block or bank of time to be used for whatever the needs are of that particular employee. “The difference with a traditional PTO policy is that the bank of time can be used for either traditional vacation reasons or could be used for traditional sick time, at the discretion of the employee, depending on his or her needs . . . all that is lumped in together.” Flores explained.
The above information is excerpted from the CER webinar titled “Protecting Your PTO Policy: Know Your Obligations When Administering Leave in California.” To register for a future webinar, visit CER webinars.
Michelle Lee Flores is a partner in the Los Angeles office of Fisher & Phillips LLP. She focuses her practice on all aspects of employment litigation including jury and bench trials; arbitration; mediation and pre-litigation negotiations; sex, race, religion, age and disability harassment and discrimination; wage and hour violations including class actions; and wrongful termination.