for all unused vacation time over the three years he worked for me. I have never paid any former employee's for unused vacation time in the past. We never had an agreement over vacation time payout. Am I responsible for unused vacation time?
Yes.
Under California law, earned vacation time is considered wages, and vacation time is earned, or vests, as labor is performed. For example, if an employee is entitled to two weeks (10 work days) of vacation per year, after six months of work he or she will have earned five days of vacation. Vacation pay accrues (adds up) as it is earned, and cannot be forfeited, even upon termination of employment, regardless of the reason for the termination. (Suastez v. Plastic Dress Up (1982) 31 Cal.3d 774)
Under California law, unless otherwise stipulated by a collective bargaining agreement, whenever the 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 of his or her earned and accrued and unused vacation days. (Labor Code Section 227.3.)
Assuming the employer did not adopt a Paid Time Off (PTO) policy, then the employer owes its employees for the earned and accrued vacation. Unless sick leave is defined as part of PTO, sick leave does not accrue.
Employees who believe they have been deprived of any earned/accrued vacation time can file a claim with a local office of the Division of Labor Standards Enforcement (DLSE) or seek help from an employment law attorney.
Michael John TonsingEmployment / Labor AttorneySan Francisco, CA ·
You may already have a problem. I do not know your facts, of course. I assume the employee who "left" had quit. For, different rules apply to employees who are discharged.
When employees are terminated or quit without having taken off all earned vacation time, the employee must be paid for the unused vacation at termination. The CA Labor Code requires it. And, CA companies may not require employees to forfeit unused vacation time upon termination. Basically, there can be no "use it or lose it" policy in this State at the end of the trail. Accrued vacation pay is due when the employee leaves.
One big payment issue can be timing. It can be more than a bit complicated. Exactly when employers must pay final wages to employees who voluntarily quit depends on whether these employees give 72 hours notice.
If employees give their employers at least 72 hours notice before quitting, employers must pay their final wages on the last day of their employment. Failure to do so can incur penalties from State regulators.
If employees do not have a written contract for a definite term of employment and do not give their employers notice, employers have a 72-hour grace period in which to pay the resigning employees. So, employers must pay the quitting employees who fit this profile within 72 hours of the time they leave the job if these employees have not given 72 hours advance notice.
On the other hand, though you say you are a small business, you might be a part of a "multi-employer central payroll plan." If so, your quitting employees must pick up their final wages on the regular payday according to the normal payroll schedule whether they give you notice or not.
Another issue that can trip up California employers is the location of the payment.
Bottom line? California businesses may have to hand-deliver or mail a quitting employee's final paycheck.
Employers should pay quitting employees at their office located in the county where the employees have been working. So, it means that quitting employees must normally return to their place of employment for their wages unless they are paid by direct deposit or designate a mailing address for their final check. Many employers are not comfortable with this. There can be other options under the law. If employees have authorized the "direct deposit" of their paychecks, then companies may directly deposit a quitting employee's final check. But, the important point is that California employers are legally obligated to have a final paycheck available for departing employees. Employers, however, aren't required to guarantee that employees actually receive the check. If employees refuse to accept the paycheck or fail to return at the specified time to get the final paycheck, employers should make a written record of employees' refusal or failure to return -- a record that prudently includes the names of any witnesses.
When employees request that employers do so and provide employers with a mailing address, employers are required to mail a final paycheck to employees who quit without giving 72 hours notice. Employers must mail these final paychecks to these departing employees within 72 hours of the time they leave the job. Weekends count in computing the 72 hours, by the way.
Bottom line is that If employers do not pay wages when, how, and where the law requires, they will be liable for administrative, civil, and criminal penalties, including waiting time penalties for each day employers are late paying these wages. And, California employers may face waiting time penalties for each day they are late paying these wages. Beware, the California Department of Industrial Relations takes violations of the CA Labor Code very seriously.
