California Companies Must Pay Vacation Pay If They Have A Vacation Policy

Laws You Should Know – Labor Code § 227 – Branigan Robertson is a California employment lawyer who focuses his practice on wage and hour issues and wrongful termination. Call for a free consultation with one of our lawyers.

Many employees call our firm wondering about vacation pay. What do California’s employment laws have to say concerning vacation pay? If your company offers it, do they have to pay it? If you get fired and you have accrued vacation pay, does the company have to pay it in your final paycheck?

Employment Attorney & Vacation Pay

Labor Code § 227 makes it unlawful for an employer to fail to pay its employees vacation pay when it has agreed with its employees to pay accrued vacation. § 227 states:

Whenever an employer has agreed with any employee to make payments to a … vacation plan … it shall be unlawful for that employer willfully or with intent to defraud to fail to make the payments required by the terms of that agreement. A violation of any provision of this section where the amount the employer failed to pay into the fund or funds exceeds five hundred dollars ($500) shall be punishable by imprisonment pursuant to subdivision (h) of Section 1170 of the Penal Code, or in a county jail for a period of not more than one year, by a fine of not more than one thousand dollars ($1,000), or by both that imprisonment and fine. All other violations shall be punishable as a misdemeanor.

Yikes. That is a serious statute (at least as far as employment law goes).

Vacation Pay Considered Wages

Under California law, earned vacation time is considered wages; and under Labor Code § 227.3 whenever an employment relationship ends for any reason whatsoever and the employee has not used all of his or her earned and accrued vacation, the employer must pay the employee at his or her final rate of pay for all such earned, accrued and unused vacation.

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