We have to use up our vacation every year or forfeit it; is this legal?

Question:

I work for an accounting firm and get ten days of paid vacation every year. Right now, I have five days of vacation left that I can use. My boss recently told me that I have to take these vacation days before the end of the year, otherwise I’ll lose them. Is this legal?

Answer:

There’s no law that requires employers to provide paid vacation to their employees. However, some states do have laws that shape the kind of vacation policies employers can create. In other words, employers don’t have to offer vacation, but if they do, they have to follow certain guidelines.

The vacation policy you’re describing is sometimes known as a “use-it-or-lose-it” policy. The employer provides a certain deadline (usually the end of the year) by which employees must use their accrued vacation or forfeit it. In most states, these types of policies are perfectly legal, as long as they are clearly communicated to employees beforehand and not applied in a discriminatory way. For example, an employer can’t apply a use-it-or-lose-it policy only to employees of a certain race or gender.

In a minority of states, including California, “use-it-or-lose-it” policies are illegal. California law declares accrued vacation to be a form of wages that have already been earned by the employee. As a result, employers cannot take those wages back. However, California employers can still maintain some control by placing a reasonable cap on vacation accrual. For example, if you earn 10 days of vacation each year, your employer could set a cap of 20 days. This means your vacation would roll over from year to year, but once you reached 20 days, you would stop accruing vacation until you fell below that amount.

For more information on whether your employer’s vacation policy is legal, contact your state labor department.

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