Kevin Sullivan and Jennifer L. Nutter, attorneys in the Employment, Labor & Workforce Management practice, in the firm’s Los Angeles office, co-authored an article in HR Legal & Compliance Excellence, titled “Will the ‘Unlimited’ Vacation Policies Trigger a Right to Wages?” (Registration required - click here.)
Following is an excerpt:
California generally requires that, when employees accrue vacation time during their employment, any accrued but unused vacation time must be paid out at the end of employment. But so-called “unlimited” vacation policies have generally been understood to be a potential exception to that rule. Such “unlimited” policies are more accurately referred to as “professional” or “reasonable use” vacation policies, where such policies do not provide for vacation to accrue. Instead, employees under such policies are allowed to take an unspecified amount of paid time off without accruing vacation time – except they are permitted to take vacation whenever and for whatever amount of time they would like, subject to the employees completing their work.
Employers that implement these “unlimited” policies typically put into place certain provisions making clear that, among other things, employees do not accrue (i.e., earn) any paid time-off time (e.g., vacation time) during their employment and, because time is not accrued, there is no payment for vacation not taken at the end of employment. But on April 1, 2020, although the California Court of Appeal did not necessarily approve of “unlimited” policies with such provisions, it explained that policies without such provisions may trigger a right to accrued vacation wages.
In McPherson v. EF Intercultural Foundation, Inc. …
See also Mr. Sullivan and Ms. Nutter’s Wage and Hour Defense Blog post “California Court of Appeal Clarifies Circumstances Where So-Called ‘Unlimited’ Vacation Policies May Trigger a Right to Wages.”