California vacation policy: How-to guide

Taking breaks is crucial for the well-being of working people, whether they're in the office or working remotely. It prevents burnout, reduces chronic stress, and boosts productivity and focus. This is why providing paid vacation benefits to employees also benefits employers. Employees who are happier and healthier prove to be more productive and loyal to their employers. In light of this, many employers offer vacation time as an employment benefit.

According to Oxfam's report on Best and Worst States to Work in America, California is widely recognized as one of the best states to work in the United States. The state has enacted strict work-hour limits, mandated meal and rest breaks, and implemented other generally favorable provisions for workers. California's labor laws and regulations make it a great workplace for anyone who values their rights and protections as employees.

What is California's vacation policy?

California vacation policy provides essential guidelines for employers to comply with the state's laws and regulations regarding vacation accrual and usage. Employers can ensure compliance with California law and avoid potential legal issues by accurately calculating and recording vacation accrual.

According to the vacation policy under the Department of Industrial Relations of the State of California, employers may decide whether or not to offer paid or unpaid vacation benefits to their employees. However, if an employer chooses to provide such benefits in the best interests of all, they must comply with the California Labor Code and the California Labor Commissioner's Office.

To establish a well-implemented California vacation policy, employers must implement:

• Clear and transparent policies: Employers may share restrictions (if any) transparently with employees during the onboarding and induction.
• Communicate effectively with employees: Employers should communicate their policies regarding vacation time to their employees through written documents such as employment contracts, company handbooks, or other similar materials. It ensures that both the employer and employee are aware of the expectations regarding vacation accrual, utilization, and any applicable limitations or conditions.

With this complete guide on laws regarding paid time off in California and the template attached to the page, an employer can easily understand the various options concerning vacation time policies, even if they're not in the "Golden State."

What is the difference between vacation pay and PTO?

It's common to use the terms "vacation pay" and "paid time off" (PTO) interchangeably, but PTO is a broader term that includes vacation days, holiday pay, sick leave, and more.

Vacation pay is a form of compensation for employees when they take time off from work for leisure, relaxation, or personal reasons. However, employers may or may not provide vacation pay, unlike other forms of PTO, such as sick leave. Employers may also consolidate vacation days, sick leave, and other forms of PTO into a single bank of days or hours, simplifying administrative processes.

What factors do employers in California consider when determining the amount of vacation time for employees?

When determining the amount of vacation time to offer, most employers in California typically consider factors such as:

• Industry standards
• Employment contracts
• Internal company policies

Employers may also offer vacation days based on the following:

• The employee's length of service
• Position within the company
• Company-wide policies

What are California's rules and regulations for vacation and paid time off?

Employers can designate a waiting period before vacation starts to accrue at the beginning of employment. The waiting period can be either the introductory or the first year of employment.

Employers can also give vacation to specific groups of employees but not others based on the type of employment. For example, employers may provide vacation time to full-time employees or managers, which may not apply to part-time employees, contractors, or freelancers.

What are the key aspects to consider in a California vacation policy?

Managing the vacation requests by employees may include:

1. Scheduling the vacation

Under California law, employers can't enforce a "use-it-or-lose-it" policy for vacation time, which means that employees' vacation time can't expire. However, to ensure the smooth conduct of business, employers may limit the amount of vacation time employees can accumulate. They can also require employees to take vacation days to prevent them from accumulating too many days.

Employers have the authority to decide the time and manner in which their employees can request time off. They're allowed to establish specific regulations for vacation requests, requiring advance notice and limiting the number of employees who can take a vacation simultaneously. Employers can also specify "blackout" dates when no employee can take a vacation.

Examples of peak seasons for businesses include:

• The summer months for the ice cream business.
• Valentine's month for all kinds of gifts and associated services.
• The back-to-school season for the stationery business.
• Football season for sports bars.
• The hospitality industry may see a peak season during holidays or events, such as New Year's Eve or the Super Bowl.

2. Communicating vacation policy

In California, Paid Time Off (PTO) laws consider vacation time as earned wages, meaning employers can't withhold or expire earned time off. However, employers can manage their vacation time responsibilities by creating policies on how and when the employees can use it. If an employer has established such a policy or practice, it's crucial to communicate these policies to employees.

3. Maintaining the distinction between sick days and personal days/floating holidays

Personal days: Many employers provide employees with sick leave, vacation time, and paid holidays. Employers may provide employees with a certain number of "annual personal" days or "floating holidays." Unlike typical holidays tied to specific days, employees can take floating holidays on any day they choose. Floating holidays are essentially the same as vacation time; the only difference is that employees can decide when to take them.

Sick leave: California labor laws mandate that employers provide their employees with paid sick leave. It's important to note that this is distinct from vacation pay. Employees must work at least 30 days yearly to qualify for paid sick days. The accrual rate for paid sick days has to be at least one hour for every 30 hours worked. For instance, if you work for six weeks and put in 40 hours weekly, you will accumulate at least eight hours of paid sick leave. California law requires that both exempt and non-exempt employees receive paid sick days.

4. Paying out accrued vacation on separation

An employer must pay out the accrued vacation time to employees with their final wages when they separate from employment, whether through resignation, termination, or other means.

• In California, employers must provide sick leave as paid time off (PTO) only since it isn't considered an earned wage. When the employment relationship ends, employers are not obligated to pay for any unused sick leave. If sick leave is part of a general paid time off policy, it must be treated like vacation and paid out upon separation from the employer.
• The employee could've taken personal days or floating holidays at any time; they're considered vacations and can't be subjected to a use-it-or-lose-it policy. They must be paid out upon separation from the employer.
• Employers can give their employees advance vacation, but they can't deduct it from a final paycheck if an employee leaves earlier than expected.
• As vacation is classified as earned wages, an employer may be responsible for "waiting time penalties" if they fail to pay out vacation with the final paycheck promptly.

5. Informing employees on vacation and paid time off

An employee handbook can be beneficial in communicating vacation policies to employees. It outlines the available benefits and entitlements, sets clear expectations, and improves communication between employees and managers. The handbook can contain comprehensive information on vacation and paid time off, along with eligibility, scheduling, and approval requirements. It demonstrates that the company values good relations with its employees. Encourage your employees to read and understand the handbook thoroughly. An employee handbook acknowledgment form is a valuable tool to obtain written confirmation that employees have read and understood the information provided in the handbook.

6. Complying with the jurisdiction's statutes

It's important to note that labor laws regarding vacation policies can differ significantly from one state to another. Therefore, as an employer, ensuring that your organization complies with the specific laws and regulations governing your jurisdiction is crucial. This includes knowing the minimum vacation time required by law, the rules governing vacation accrual, and any restrictions on how employees can use it. Failure to comply with the relevant laws may result in severe consequences.

Step-by-step procedure to draft California vacation policy

Eligibility

Mention the eligibility of each employee for holiday and vacation pay based on the tenure of employment at the organization.

Holiday pay

This section describes the annual holiday schedule, no accrual policy, paid holiday during weekends, and the company's advised action for employees on unlisted religious holidays. 

Annual holiday schedule: In this clause, list the annual holidays and the eligibility of employees towards them.

No accrual: Describe an employee's eligibility for holiday pay and include the conditions they must satisfy, as it doesn't accrue for employees under California law.

Paid holiday during weekends: In this clause, describe how the company will account for a holiday that falls during the weekend as per the California Government's State Holidays List. For instance, if the scheduled holiday falls on a Sunday, it may be observed the following Monday.

Religious holidays: In this clause, cite instances and the company's advised action when an employee wishes to observe specific religious holidays not included in the holiday schedule. Generally, they may arrange for personal days, vacation days, or an authorized absence without pay on these occasions with prior written approval from the company.

Vacation pay

This section describes an employee's vacation pay, accrual in a calendar year, and the procedure for requesting a vacation.

Rate: In this section, you may describe an employee's vacation pay and the rate at which their pay will be calculated during the vacation period. When describing an employee's vacation pay, it's important to note that it is the same as their regular pay rate. If the employee's regular pay rate varies, the vacation pay will be calculated as the average rate of the previous days they worked.

Calendar year: In this section, mention the vacation accrual for an employee based on the calendar year, which begins on January 1st and ends on December 31st. The accrual can be prorated based on the employee's start date.

Notification requirements: In this section, establish the protocol for requesting a vacation, like:

• Employees must provide advance notice of particular days (as specified in the employee handbook). However, the approval of the request is entirely at the company's discretion and is subject to the availability of adequate staffing.
• The company tries to accommodate the employee's requested vacation time, but it can't be guaranteed.
• Employees are advised to make their vacation requests as early as possible.
• Senior employees and emergency cases may be given preferences.

Carryover/termination: In this section, clarify if the employees can carry over the vacation each calendar year as it doesn't expire, and specify the accrual.

Frequently asked questions

What information is needed to complete the California vacation policy?

• Company name and details: Get the company's name and other contact details for which you will draft the policy
• Type of holidays: Have the details of the kinds of days off offered (including holidays and personal days)
• Types of employees: The knowledge of how those policies apply to different types of employees (full-time vs. part-time)