Human Resource Blog

Paid Time Off

Is it legal for a company to require a certain number of paid time off days be used by a certain period of time? For instance, could we say that employees must use 5 days of their paid time off by July 1st each year or they lose the days?

Yes, this policy is lawful in every state except California. (In Maryland and a few other states, it is being tried in the courts, but it is generally permitted.) 

This policy is generally referred to as a *use it or lose it* vacation policy. Employees who do not use their accrued vacation by a certain date lose them. The employees are not entitled to payment in lieu of the vacation time, nor can they carry it over.

Most use it or lose it policies have the end of the calendar year as a cut-off point, or the employees anniversary date. However, there is no law that would prevent you from setting a July 1 cut-off date, or a requirement that employees use a certain amount of vacation time every 6 months. Many companies take such steps to limit their potential liability for total accrued time off.