California Rules On Vacation and Paid Time Off PTO

Employees want to know about their earned time off, for vacation and other personal needs, and employers want to know what they are obliged to offer. Vacation and PTO don’t have to be complicated benefits to offer, so long as everyone is aware of the rules in California. With this guide, both employers and employees will have a better understanding of California’s PTO laws so that everyone can have their needs met.

What is PTO?

PTO stands for paid time off. This is any time an employee is away from work and not working but gets paid during this period of time. The most common types of PTO are vacation time, sick/medical leave, personal time, holidays, bereavement, jury duty, and parental leave.

How is PTO used?

PTO is used to ensure an employee continues to acquire their regular wages even when they are not present at work. In California, though paid vacation is not an obligation, sick leave as PTO is required. The FMLA (Family and Medical Leave Act) provides eligible employees with up to 12 weeks of unpaid, job-protected leave per year, but only for qualified family and medical reasons. Your company’s PTO policy will lay out specifics such as the amount of paid time off provided by your employer, how you accrue that time, and the rules behind maximizing this employee benefit. Companies typically offer one of these three options to choose from when determining the workings of their PTO policy: traditional paid time off, a PTO bank, and unlimited PTO.

In California, traditional PTO is provided to employees and typically includes accrued paid leave for vacation and sick time. Employees accrue PTO over time, and employers must comply with state laws regarding accrual rates, rollover, and payout of unused PTO. In California, accrued PTO is considered wages, and employees are entitled to be paid for unused PTO upon termination or separation.

The concept of a PTO bank is essentially similar to traditional PTO, as it still involves accrued paid leave for various purposes, such as vacation, sick days, and personal time. The key difference is that a PTO bank consolidates all these types of leave into a single bank of hours, allowing employees to use their paid time off for any reason they choose. In California, employers must ensure compliance with state laws regarding accrual rates, usage, and payout upon separation.

Unlimited PTO policies grant employees the flexibility to take time off without specific accrual limits. Employees can take as much paid time off as they need with the approval of their employer. However, California law still imposes certain requirements, such as ensuring that employees are allowed to take accrued but unused PTO upon separation, and the policy should be administered in a manner that complies with state wage and hour laws.

What is Better, PTO or Vacation?

Should I use PTO or vacation?

If an employer in California offers paid time off for vacation, it is the obvious choice for employees intending to use it towards a vacation. Even though PTO can only be used for its stated purposes, some companies in California permit combining sick leave and vacation leave policies, essentially allowing employees to use paid sick time for ‘any reason’. Businesses that allow for a wide latitude in sick leave are creating earned benefits, which impacts what happens if an employee ceases to be employed. The same holds true for combined sick and vacation leave policies.

Is vacation pay the same as PTO?

Sick leave is required in California, while vacation pay, also a type of PTO, is not required under state law. In fact, in California, there is no requirement for employers to provide vacation time, paid or unpaid, to their employees. However, many do so, recognizing the advantages of offering this benefit to their staff. Where employers do offer paid vacation, there are restrictions on how they must meet this obligation.

How vacation time is earned

Vacation time in California can be earned as a fixed amount, such as one week per year, or accrued over time. Paid vacation comes in the form of wages and is earned as labor is performed. It is accrued based on the workdays offered as vacation entitlements over the year. It could be accrued by the day, week, pay period, or another timeframe established by the employer.

Under California law, employers can put certain conditions on paid vacation time. For instance, an employer can include a waiting or probationary period at the start of employment during which an employee cannot accrue paid vacation time.

Can an employer withhold earned vacation time?

Employers in California have the right to manage their vacation pay responsibilities, including controlling when paid vacation time can be used and how much can be used at once. They may set out advance notice requirements or block out certain dates from vacation approvals.

However, because vacation time is treated as earned wages, once it is earned, employees cannot lose it. Despite what some employers may try to claim, under California’s labor law, an employee’s accrued vacation time cannot expire or be taken away. Employers may, however, place a cap on vacation accrual until the employee uses some of their vacation time.

Are Employers Required to Provide PTO?

Employers in California are not required to provide PTO aside from sick leave. California employers must provide a minimum of five days or 40 hours of paid sick leave. Some cities have local laws requiring more time than that.

Can my PTO be denied?

Employers can restrict the use of paid sick leave to 40 hours or five days per year, and require that that time must be taken in at least two-hour increments but not more. They cannot retaliate against employees for using sick leave or refuse a valid request to use it. California law allows employers to legally deny your request if you request vacation days during a period labeled off-limits by your employer.

Do all employees get PTO?

Some employees may not receive paid sick leave in California. That includes employees covered by collective bargaining agreements, some air carrier employees, and employees of the California In-Home Supportive Services Program.

What happens to PTO when laid off?

The only mandated PTO, sick leave, has no requirement to be paid out upon termination. Optional paid leave, such as vacation time, ‘earned’ sick days or hybrid personal/sick days must be paid out to employees upon separation. These benefits come in the form of wages, which means employees are reimbursed those wages at their final rate of pay, on their final paycheck.

How does FTE affect PTO?

In California, so long as an employee has met the minimum requirements for hours worked, they will receive paid sick leave.

What does full-time equivalent mean?

Full-time equivalent, or FTE, is a unit to measure time worked by employees even if they work different hours per week.

How is FTE calculated?

A full-time employee is 1 FTE, and a part-time employee is assigned an FTE number based on what they work relative to a full-time employee. The calculation is an employee’s scheduled hours divided by the number of hours considered by employers to be a full-time workweekFor instance, if 1 FTE is 40 hours a week, someone working 20 hours a week is 0.5 FTE.

How does PTO Accrual Work?

Sick leave, the only required PTO in California, is required for any employee who works at least 30 days in a year. They can begin accruing that paid sick leave the first day of employment but can only start using it once they have worked for an employer for at least 90 days. Employees will accrue one hour of paid sick leave for every 30 hours worked.

Employers can make this process simpler with the option of offering five days of paid sick leave to every employee at the start of each year.

Do you accrue PTO while using PTO?

For optional PTO like paid vacation days, employers are generally able to determine their own policies. Some may choose to base accrual on hours actually worked, while others may allow PTO accrual to continue during paid leave.

Can you cash out vacation time in California?

If an employer offers vacation time, it is considered earned wages. This means it cannot be taken away, and it accumulates as the employee works more hours.

When it comes to cashing out your vacation time, California law allows employees to “cash out” their accrued vacation time while they are still employed, but only if the employer’s policy explicitly permits it. This means you need to check your company’s vacation or paid time off (PTO) policy. Some companies may allow you to cash out your vacation days at your current wage rate either at the end of the year or at specific times during the year.

If you leave your job or are terminated, your employer must pay you for all unused vacation time as part of your final paycheck. This is because, under California law, accrued vacation time is considered a form of wages that has already been earned by the employee.

So, if you’re planning to cash out your vacation days while still employed, your first step should be to review your company’s policy or talk to your HR department to understand the specifics. If you’re leaving your job, rest assured that you will be paid for your unused vacation time.

Can you use sick days as PTO?

This depends on the policy of the employer. Under standard law, sick days are a separate, guaranteed form of PTO in California. Some employers may choose to offer sick days to be used for any reason or a hybrid of sick time and personal time falling under one PTO umbrella.

Is PTO the same as sick leave in California?

While sick leave is a type of PTO, unless an employer decides to offer other paid time off, sick leave is the only PTO required by state law. However, in California sick leave is not considered a wage, which means that at the time an employee terminates employment with a company, the employer does not need to pay them for unused accrued sick leave. If an employer has an umbrella PTO policy that allows employees to use accrued PTO for any personal reasons, then sick leave becomes considered a wage.

Can you get a doctor’s note after the fact?

Doctor’s notes are not necessary to use accrued paid sick leave. The law only requires an oral or written request from the employee.


It is important to remember that labor and employment laws change frequently.  Working with experts who are aware of the latest changes can help ensure that your rights and obligations are properly taken care of. Here at Finvisor we are always ready to help.  Reach out to us today.



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