California Court Of Appeal Says Unlimited Vacation Policies Fly

Written by Jeremy Mittman

Why This Matters

Over the last several years, some employers have chosen to adopt unlimited vacation time policies for their employees.  Unlike more traditional vacation policies, under unlimited vacation policies, vacation time does not vest.  Rather, employees can take as much vacation time as they’d like (generally within reason and subject to business needs).  One of the benefits of these policies for employers is that, while vested vacation time is considered wages and must be paid out upon termination of employment, because unlimited vacation time does not vest, there is nothing to pay out when employment ends.

Recently, in McPherson v. EF Intercultural Foundation, Inc., the California Court of Appeal ruled that, while under the facts of the particular case, the employer’s “unlimited” vacation time policy was not valid (and so the actual vacation days taken by plaintiffs should be accrued and paid out upon termination), employers may have “truly unlimited time off policies” if they are provided to employees in writing and meet certain criteria set forth below.

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California Court of Appeal Upholds Clearly Defined Waiting Period Before Vacation Begins to Accrue

By Steven Schneider and Hilary Feybush

Building on earlier vacation policy decisions, a California Court of Appeal recently held in Minnick v. Automotive Creations, Inc.  that employers may impose a clearly expressed waiting period before an employee can begin to accrue vacation time.  This means that  employers do not have to provide vacation pay vesting on day one of employment.  While an employer cannot contract around the rule against forfeiture of wages, an employer does not do so by unambiguously providing that employees do not begin to earn vacation pay until a certain period of employment has occurred.  However, once vacation pay under an employer’s policy starts to be vested and earned, it cannot be taken away.

In the Minnick case, the employer’s policy clearly expressed that no vacation time was earned during an employee’s first year of employment.  The plaintiff was a former employee who had only been employed for six months.  He accordingly was not paid any unused vacation in his final paycheck because he had not worked a full year.  His lawyer argued that the employer’s policy violated California law because it required employees who worked less than one year to forfeit vested vacation pay. Continue reading “California Court of Appeal Upholds Clearly Defined Waiting Period Before Vacation Begins to Accrue”