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The beginning of any new year is a good time for employers to review their vacation and sick leave policies to make sure no hidden surprises await.
Neither vacation nor sick leave are required by federal or state law, but if offered, they are not treated the same. Employers can implement a “use it or lose it” rule with sick leave, but not with vacation pay. For example, at year’s end, an employee can forfeit any unused sick leave remaining on the books, but not so with earned and unused vacation.
Since earned but unused vacation pay is carried over from one year to the next and will continue to accrue unless the amount of unused vacation earned is capped. Caps on the amount of vacation an employee can earn are permissible. The law treats earned but unused vacation pay as wages which must be paid at the time of termination. Failure to do so may subject the employer to waiting time penalties and interest.
An employee earns his/her vacation or sick leave on a pro rata basis each pay period. Many payroll services will perform the calculation as to the amount of vacation and sick leave earned on the employee’s paycheck. However, mistakes can be made, and employers are encouraged to periodically review the calculations to verify their accuracy.
Employers are permitted to place reasonable limitations on use of vacation pay. For example, employers can deny requests to take vacation during certain period times of the year or if too many requests for a certain period of time are requested by multiple employees.
California allows employees to use sick leave if time off is needed to care for a sick child, parent, spouse or domestic partner, not just for the employee’s own illness.
Now is a good time to review vacation and sick leave policies and other policies to insure compliance with the law.