Employers usually reserve the right to approve in advance when their employees can schedule requested vacation time.  But can an employer with a garden-variety vacation/PTO policy (i.e., non-union, non-ERISA) ever require employees to use accrued vacation or PTO for an otherwise unpaid absence from work? 

Consider the following commonly occurring scenarios: 

1.  Sally needs to take a leave of absence to care for her ailing father. 

2.  Mike needs to take a leave of absence to deal with his own disabling medical condition. 

3.  Pregnant employee, Marcia, just found out she is ordered to bed rest for the remainder of her pregnancy. 

4.  Frank announces his plan to retire.  Then his supervisor makes her own announcement: Frank must use his vacation now, before his resignation is effective. 

5.  When the company closes for the last week of the year, all employees must use their vacation or PTO time. 

Remember the Rules:

Contrary to what many employees believe, vacation or PTO is not an entitlement.  It is a matter of agreement between the employer and the employee.  So, the accrual and terms of use can generally be subject to whatever reasonable restrictions and requirements the employer’s policy provides.  The key to validity here is the reasonableness of the restrictions. 

Reasonable restrictions can be things like:

✓     Only full-time employees are eligible for vacation
No one is eligible to accrue vacation until completing 90 days of employment
Vacation can be taken in minimum increments of, say, 4 hours or 1 day  
Unreasonable restrictions can be

      Requiring employees to use up all vacation in the year it is earned, or very shortly thereafter (sometimes called an “accelerated accrual” policy).  The Department of Labor Standards Enforcement deems this to be unfair 

            Employers must give sufficient notice to the employees of their reasonable restrictions.  Any restrictions on the use of vacation/PTO should be clearly stated in the policy, which should be given to the employees before work begins and vacation/PTO accruals commence. 

Can You Start Planning Your Employee’s Vacation Itinerary?

            So, what about Sally, Mike, Marcia, Frank, and the whole work crew slated to take mandatory PTO the last week of December? Applying these rules to the scenarios above, you arrive at the following results: 

            Scenarios 1 and 2:  If the employer’s policy specifies that employees must use vacation in connection with FMLA/CFRA leaves and other otherwise unpaid leaves of absence (see, we’re back to contract terms here), then the employer can require Sally and Mike to use vacation/PTO for their family and medical-type leaves.  

            Scenario 3:  What about pregnant Marcia?  She is on an unpaid leave, too.  But under the CA Pregnancy Disability Leave law, the employer can’t require her to use vacation/PTO for a pregnancy disability leave.  She has to be given the option to use it if she chooses.  (For a refresher on pregnancy disability leave regulations, click here and here.)

            Scenario 4:  Frank’s supervisor is probably too eager to show Frank the door.  Forcing an employee to use up vacation rather than serve out the term of employment, especially in the absence of any vacation-plan language anticipating such a contingency, runs the risk of being called a forfeiture of the vacation wages that would have been Frank’s had he been permitted to serve out his employment, for unused and accrued vacation/PTO must be paid out upon termination.  (To see last week’s posting for a reminder on vacation rules, click here.)

            Scenario 5:  Requiring use of vacation/PTO during a one-week office closure is fine, so long as all employees have the opportunity to accrue more than one week of vacation per year. 

            Workplace Solution:  Employers who do not have a vacation accrual cap in place may want to require the use of vacation, at least by certain groups of employees or at certain times of the year.  There is also the option of simply paying out accrued vacation on a periodic basis, to keep accrual balances from growing too large.  Even an employer that has an accrual cap will always want to retain the right to approve scheduling of vacations, and may also want to designate in the policy periods when vacation can, must or cannot be taken.