April 27, 2016
Does your employer offer paid vacation? No law requires employers to give their workers paid vacation days, but most companies do pay for some vacation days: More than 90% of all full-time employees in private industry receive paid vacation, according to 2015 figures from the federal Bureau of Labor Statistics.
Because employers don't have to offer vacation, those that do have a lot of legal leeway in setting the rules on who is eligible, how vacation time accrues, when vacation may be used, and so on. This article explains the rules that govern paid vacation.
Because no law requires employers to provide paid vacation, employers have free rein when it comes to determining how much vacation to offer and to which employees. Employers can provide only a few paid days off a year or a couple of months' worth. Typically, employers decide how much vacation to provide based on industry standards and employee expectations in the area and field.
Employers are also free to offer vacation to some employees and not to others. For example, they are legally allowed to reserve paid vacation only for full-time employees. And many do: The Bureau of Labor Statistics reports that, while 91% of full-time employees in private industry receive some paid vacation, only 34% of part-time employees do.
Employers may not discriminate illegally in determining who gets vacation—that is, they may not base paid vacation decisions on protected characteristics such as race, religion, or disability. Beyond this legal restriction, however, employers are generally free to offer as much or as little vacation as they see fit and to set eligibility rules that make sense for their business.
Companies are also free to adopt schedules for vacation accrual. For example, company policy might provide that an employee earns one vacation day per month or a certain number of hours per pay period. Some companies impose a waiting period before new employees may begin accruing vacation time. And some companies allow employees to accrue more vacation days when they have more tenure at the company. For example, a company may allow employees to accrue three weeks of vacation per year for their first five years, but allow employees who have passed the five-year mark to accrue four weeks per year.
It is also legal for companies to cap how much vacation time employees can accrue, and many companies take advantage of this right to encourage employees to use their vacation time regularly. Once employees reach the limit set by the cap, they can't earn any more vacation time until they use some and bring themselves back down below the cap.
In some states, it is illegal for employers to impose "use it or lose it" policies, by which employees must forfeit vacation time they have already accrued unless they take it by a certain time. In these states, vacation time is considered a form of compensation, which must be cashed out when the employee quits or is fired (as explained below). A policy that takes vacation time away is therefore seen as illegally failing to pay employees compensation that they have already earned. Although the difference may seem fairly technical, an accrual cap is legal in these states because it prohibits the employee from earning vacation time in the first place, rather than taking away vacation time after the employee has earned it. Some states specify what the cap may be; for example, California generally allows a cap of 1.5 times the annual accrual rate. To find out your state's rules, contact your state labor department.
Companies are largely free to determine when employees may use vacation. For example, an employer may prohibit employees from using their vacation during its busy season. Employers may also set notice rules requiring employees to give advance notice of vacations (and many employers do, to avoid having too many workers out at the same time). Some employers require employees to schedule their vacations well in advance. And employers are free to limit how much vacation time employees may take at once.
Employers may also impose a waiting period on using vacation time for new employees. Some employers, for instance, don't allow employees to use any vacation during their first three to six months on the job. Even if the employees accrue vacation during this period, they may not use it until the waiting period is up.
If you have accrued vacation days that you haven't yet used when you quit or are fired, you may be entitled to be paid for that time. About half of the 50 states have laws requiring employers to pay out an employee's unused vacation when the employment relationship ends. (Learn more in Nolo's Q&A Should My Final Paycheck Include Vacation Time?) Even in states that don't require the company to pay out vacation time in every case, an employer may have to cash out unused vacation if it has a policy or practice of doing so. Check with your state labor department to find out your state's rules on this issue.
For more information on your right to time off work and everything else employees need to know to protect their rights, get Your Rights in the Workplace by Barbara Repa (Nolo).