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PTO in California

In the state of California, can an employer distinguish they way PTO is calculated for exempt and nonexempt? Exempt is accrued immediately upon hiring at a rate of XX and nonexempt employees are granted PTO 12 month and 24th month of employment, not accrued?

There are neither federal nor California laws requiring an employer provide its employees with paid time off (PTO) including vacation time or sick leave. However, in California if an employer does have an established policy, practice, or agreement to provide such benefits, then certain restrictions regarding the fulfillment of its obligations apply.

Under California law, earned vacation time is considered wages and vacation time is earned as labor is performed. An employer’s vacation plan may provide for the earning of vacation benefits on a day-by-day, by the week, by the pay period, or other period basis. Employers are permitted to provide a specified time period in the beginning of the employment relationship during which an employee doesn’t earn any vacation time. Earned vacation time must be paid out upon termination of the employment relationship. Use-it-or-lose-it vacation polices are not permissible in California.

Conversely, sick leave is a non-accrued benefit in California. Unused sick leave may be forfeited at the end of a designated period of time and sick leave does not need to be paid out upon termination of the employment relationship.

Employers may offer combined vacation, sick leave, and personal days as PTO, allowing employees a certain number of days off to use as the employee chooses. In California, the full PTO allotment is considered an accrued, earned wage-benefit. So, just like with vacation time, earned but unused PTO must be paid to employees upon the termination of the relationship and use-it-or-lose-it policies are not allowed.

It is lawful for an employer to exclude certain classes of employees from earning PTO or offer different benefit plans based on employee classifications i.e. part time or on call workers. It’s recommended the employer has a clear policy establishing employee eligibility and benefit descriptions. Though no regulations specifically address an employer calculating PTO differently for each class of employees, the aforementioned regulations would still apply. Also, using different calculations would seem to only cause administrative hardship to the employer.

Lastly, benefit plans may differ among employees only based on employment classifications such as exempt and non-exempt, full time and part time, date of hire, length of service, or geographic location. Plans must be non-discriminatory and not adversely impact or unintentionally discriminate against protected groups.


This entry was posted on Monday, April 7th, 2014 at 12:46 pm and is filed under
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