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  • California labor law and vacation caps

    A challenge for y'all California labor law experts.

    California labor law does not allow for "use it or lose it" vacation
    policy but it does allow for vacation caps. Question 5 at
    http://www.dir.ca.gov/dlse/FAQ_Vacation.htm spells it out:

    ---

    Q. My employer's vacation policy provides that once an employee earns
    200 hours of vacation, no more vacation may be earned (accrued) until
    the vacation balance falls below that level. Is this legal?

    A. Yes, such a provision would be acceptable to the Labor
    Commissioner. Unlike "use it or lose it" policies, a vacation policy
    that places a "cap" or "ceiling" on vacation pay accruals is
    permissible. Whereas a "use it or lose it" policy results in a
    forfeiture of accrued vacation pay, a "cap" simply places a limit on
    the amount of vacation that can accrue; that is, once a certain level
    or amount of accrued vacation is earned but not taken, no further
    vacation or vacation pay accrues until the balance falls below the
    cap. The time periods involved for taking vacation must, of course, be
    reasonable. If implementation of a "cap" is a subterfuge to deny
    employees vacation or vacation benefits, the policy will not be
    recognized by the Labor Commissioner.

    In defining "reasonable" in this context, the Labor Commissioner has
    taken the position that a worker must have at least nine months after
    the accrual of the vacation within which to take the vacation before a
    cap is effective. This "reasonable" time allows an employee to take
    fully vested vacation at times convenient to both the employee and
    employer without forcing an employer to accrue a large vacation pay
    (or time) liability.

    ---

    Even after reading the Labor Commissioner's opinions, I don't
    understand when does the clock start ticking for the nine months. If I
    accumulate 2 weeks of vacation per year and the cap is set at 3 weeks,
    I hit the cap after 18 months of employment (assuming no vacation
    taken yet). My confusion stems from the fact that vacation vests in
    discrete units on a pro-rated daily basis, i.e. I have accrued 0.308
    hours after my 1st day of employment, 0.616 after my 2nd day and so
    on.

    Thank you,

    Kenneth


  • #2
    California labor law and vacation caps

    Second attempt at posting (first was on 2/10):

    On Tue, 10 Feb 2004 09:29:13 -0500, [email protected] (Kenneth
    Brown) wrote:
    California labor law does not allow for "use it or lose it" vacationpolicy but it does allow for vacation caps. Question 5 athttp://www.dir.ca.gov/dlse/FAQ_Vacation.htm spells it out:Q. My employer's vacation policy provides that once an employee earns200 hours of vacation, no more vacation may be earned (accrued) untilthe vacation balance falls below that level. Is this legal? A. Yes, such a provision would be acceptable to the LaborCommissioner. Unlike "use it or lose it" policies, a vacation policythat places a "cap" or "ceiling" on vacation pay accruals ispermissible. Whereas a "use it or lose it" policy results in aforfeiture of accrued vacation pay, a "cap" simply places a limit onthe amount of vacation that can accrue; that is, once a certain levelor amount of accrued vacation is earned but not taken, no furthervacation or vacation pay accrues until the balance falls below thecap. The time periods involved for taking vacation must, of course, bereasonable. If implementation of a "cap" is a subterfuge to denyemployees vacation or vacation benefits, the policy will not berecognized by the Labor Commissioner.In defining "reasonable" in this context, the Labor Commissioner hastaken the position that a worker must have at least nine months afterthe accrual of the vacation within which to take the vacation before acap is effective. This "reasonable" time allows an employee to takefully vested vacation at times convenient to both the employee andemployer without forcing an employer to accrue a large vacation pay(or time) liability.Even after reading the Labor Commissioner's opinions, I don'tunderstand when does the clock start ticking for the nine months. If Iaccumulate 2 weeks of vacation per year and the cap is set at 3 weeks,I hit the cap after 18 months of employment (assuming no vacationtaken yet). My confusion stems from the fact that vacation vests indiscrete units on a pro-rated daily basis, i.e. I have accrued 0.308hours after my 1st day of employment, 0.616 after my 2nd day and soon.
    Your question is a good one but doesn't have a good answer. My belief
    is that a cap like the one at your employer's would run afoul of what
    the Labor Commissioner believes is reasonable. I don't think it's
    ever been tested, though. The only way I can make sense of it is that
    the 9 months refers to enough vacation so that you can accrue your
    entire 2 weeks for a year, not use any of it during that year, and
    continue to accrue for 9 additional months before capping. The
    wording, though, of the DLSE website makes it tough because it makes
    you start thinking precisely what you thought -- the pro-rated
    accrual, which is fairly typical, too.

    I should point out that a cap of 3 weeks on a 2 week/per year vacation
    policy is not unusual, regardless of my view that it's unlawful. :-)
    My prior law firm -- a big firm -- had precisely that kind of cap. I
    mentioned it to the head of labor and employment, and she smiled.

    ------------------------------
    Bob Stock, California Attorney
    Nothing I've said should be relied on as legal advice.
    ------------------------------

    Comment


    • #3
      California labor law and vacation caps


      Kenneth Brown <[email protected]> wrote:
      : A challenge for y'all California labor law experts.

      : California labor law does not allow for "use it or lose it" vacation
      : policy but it does allow for vacation caps. Question 5 at
      : http://www.dir.ca.gov/dlse/FAQ_Vacation.htm spells it out:


      Not an attorney but work for a company that has such a policy.

      Vacation is not a "right" that must be given by a company. It's my
      understanding that it is purely at the discretion of the employer
      to award vacation. However, earned vacation is an "entitlement" according
      to California Labor Code (as I have read).

      So... I would suspect that placing a cap on earned vacation and having
      the contingency of "not being able to earn vacation" under any terms
      an employer sees fit would presumably be in conformance to labor code in
      California.

      b.

      Comment

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