California Employment Law-Vacation Pay

When employees are laid off, they are paid for vacation time that they

have accrued but have not used. Typically, annual salaries are

divided by the number of working days in a year, and the employer pays

the daily rate times the number of vacation days due.

This issue is complicated when employees salaries are reduced prior to

their lay-off. So my question is, what does California law state, if

anything, with regards to whether the employer is obligated to pay

vacation days at the salary rate whilst those days were accrued? Or

is it simply that the employer pays the daily rate at the salary rate

in effect at termination? In the case of an unfortunate employee that

faced a 60% reduction in salary, and then got canned with a lot of

unused vacation, it makes a difference. As it does for the frugal,

failing employer.

Thus, your help in finding reference to the employment code would be


Clarification of Question bygingko-ga

Please note, the fact that this employer does pay for unused vacation

days upon termination is not in question.

One thought on “California Employment Law-Vacation Pay

  1. While we cannot provide legal advice in this forum, this answer

    provides links to the relevant laws I was able to locate, and a

    layman's speculation on what this means. If you have any questions,

    please contact a lawyer. (I will be happy to clarify my answer, of

    course, but nothing I say should be construed as legal advice. I am

    not a lawyer. I don't even own a pair of shiny shoes.) I am assuming

    that you are asking from the perspective of the employee. If I'm

    wrong, the information should still be valid, but the final section on

    filing a dispute won't apply.

    That said, I'll give you a short answer and a long answer.

    The short answer is that the law states specifically that an employees

    are to be compensated for unused vacation time at their final rate of

    compensation. It also allows for disputes to be decided by the Labor


    And now for the long answer, divided into sections on the Relevant

    Laws, How to File a Dispute, Related Laws, and Finding a Lawyer.


    The California Labor Code is available online here in its entirety:

    It's also available in searchable format here:

    If you go down to the section titled "Search California Codes," select

    "Labor Code" from the dropdown menu, and then enter 'vacation' as your

    search term, it'll provide you with a list of the employment laws that

    mention vacation time.

    The first link in the list (CALIFORNIA LABOR CODE SECTION 200-243)

    addresses your situation. (If you're looking for this in the full text

    of the code from the first link, it's under California Labor

    Code–>Division 2–>Part 1–>Chapter 1–>Article 1–Section 227.3)

    And here is the relevant section of the code:

    "227.3. Unless otherwise provided by a collective-bargaining

    agreement, whenever a contract of employment or employer policy

    provides for paid vacations, and an employee is terminated without

    having taken off his vested vacation time, all vested vacation shall

    be paid to him as wages at his final rate in accordance with such

    contract of employment or employer policy respecting eligibility or

    time served; provided, however, that an employment contract or

    employer policy shall not provide for forfeiture of vested vacation

    time upon termination. The Labor Commissioner or a designated

    representative, in the resolution of any dispute with regard to

    vested vacation time, shall apply the principles of equity and


    While it's never truly safe to assume anything, as a layman, I would

    *guess* that this section of the code assumes that the employee's

    'final rate' is that employee's highest rate of compensation, with

    the potential exception of wage reductions due to just cause. (These

    are covered elsewhere in the labor code, but I don't want to clutter

    your answer with this unless you're interested. If you would like

    links to this, please feel free to ask for a clarification.) The

    situation you've described, however, implies that the employee was not

    at fault for the reduction in pay, and in accordance with the code,

    the Labor Commissioner or a designated representative would hear the

    case and make a judgement on the rate of compensation due for the

    vacation time.


    The California Labor Standards Enforcement website is here:

    and information on filing a wage claim is here:

    From the page above:

    "An employee or former employee may file an INDIVIDUAL wage claim to

    recover:<…>Unused vacation hours that were not paid upon termination

    of the employment relationship, e.g., a quit, discharge, or layoff."

    This page provides a link to a PDF pamphlet with detailed instructions

    on filing a wage claim, as well as a link to the actual form you fill

    out. The claim itself cannot be filed online, but must either be

    mailed or filed in person.


    For background and general information on payment of wages in a

    layoff, here are some more links to codes that may be relevant:




    Article 1. General Occupations


    201. (a) If an employer discharges an employee, the wages earned

    and unpaid at the time of discharge are due and payable immediately…

    (b) Notwithstanding any other provision of law, the state employer

    shall be deemed to have made an immediate payment of wages under

    this section for any unused or accumulated vacation, annual leave,

    holiday leave, or time off to which the employee is entitled by

    reason of previous overtime work where compensating time off was

    given by the appointing power, provided, at least five workdays prior

    to his or her final day of employment…"

    Again, though, I would like to reiterate that I am not a lawyer, and

    it may be worthwhile for you to locate a lawyer who specializes in

    labor disputes before you take any action on this.


    If you would do decide to consult with someone first, you can search

    for lawyers in your area from this page:

    You'll need to enter your state, your city or ZIP code, and a practice

    area (Labor Law), and you should be provided with a list of

    specialists. (I'd do an initial search for you, but it won't give me

    results without a city or ZIP code.)

    Before you actually speak to a lawyer, you might want to check out

    their record with the state bar association:

    This site will allow you to see a lawyer's current status with the bar

    association, and any public record of discipline.

    And again, if there's anything I've left out here, please feel free to

    request a clarification, and I'll get you whatever I can.

    Good luck and hang tight,


    Search terms:

    california "labor and employment"

    california "labor commissioner"

    california bar association

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