California is like every other state in that it does not require employers to provide employees with paid time off. Unlike in most other states, however, if an employer does provide employees with paid time off, then employees have a vested right in such time. What this means is that employers are prohibited from enacting “use it or lose it” paid time off policies. It also means that upon separation, California employers must pay out employees for any unused paid time off.
Due to these requirements, and to remain competitive with other employers, some employers have instituted “unlimited” paid time off policies whereby employees do not accrue any specific amount of vacation time but, rather, are free to take (or not take) as much (or as little) vacation as they want. The commonly held belief amongst most employers is that such unlimited paid time off policies benefit employees by providing them with flexible schedules while, at the same time, allowing employers to avoid the obligation to pay out any unused paid time off upon separation. In McPherson v. EF Intercultural Foundation (McPherson), the California Court of Appeal issued a shot across the bow to employers adhering to this commonly held belief by holding that the unlimited paid time off policy at issue did obligate the employer to pay out unused paid time off upon termination.
Continue Reading California Court of Appeal Issues Warning to Employers with Unlimited Paid Time Off Policies