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Are "use it or lose it" vacation time policies legal?

You have had a busy year with your California employer, and did not use all of your vacation time. Perhaps you simply did not have time, or perhaps you chose to save up your vacation time to use to take a more extended vacation later. But the end of the year is approaching, and your employer has informed you that if you do not use your vacation time now you may lose it once the year rolls over. Is your employer legally allowed to cancel out your unused vacation time at the end of the year?

No. Per California labor law, vacation time is another form of accrued wages earned over time during the course of your employment. For an employer to rescind any earned vacation time at the end of the year would be equivalent to denying you wages for time worked. Therefore it is illegal for an employer to claim that your vacation time must be used by the end of the fiscal or calendar year, or it will expire.

The state of California does not recognize any such policy as legal. If an employer makes or enforces such a policy, you may have a case for a wage and hour claim under California labor law. However, be aware that this may not apply if an employer institutes a trial period for new employees, in which vacation time may be subject to certain limitations for the first six months to a year of employment.

This is an informational post that should not be used as actionable legal advice.

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