What California Employers Must Pay Upon Termination

A worker recently asked whether his now-former employer should have included sick time and vacation time in his final paycheck. He wrote: “I’m no longer working for [the employer] and I thought I was going to get my paid time off with my last check such as … sick time and vacation time. What happened?”

A qualified employment lawyer would have to look over that employer’s specific policies and have more information on the circumstances to provide a more complete answer for this particular incident. However, California’s laws on the general rules for the final paycheck are the starting point.

When an employer terminates a worker without advance notice, all wages and earned but unused paid vacation are due and payable immediately.

Earned Vacation Pay Must be Included in Final Check: California does not require an employer to provide paid vacation to any of its workers. However, when a business does offer this benefit, an important rule applies. Our article “California Vacation Pay” observes: “Under California law, whenever the employment relationship ends, for any reason whatsoever, and the employee has not used all of the employee’s earned and accrued vacation hours, the employer must pay the employee these hours.”

Sick Pay May Not Have to be Included, Depending on the Specific Company Policy: California also does not require an employer to provide paid sick time to any of its workers. However, when a business does offer this benefit, another rule generally applies. Our introduction article, “California Sick Leave and Sick Pay”, states: “If such an employer does provide paid sick time, a worker has the right to take it as long he or she complies with company rules on the subject.  Unlike vacation pay benefits which accrue and are payable on termination if not previously used, business can specify a “use it or lose it” policy on paid sick time, e.g., any portion of entitled sick pay an employee does not utilize in a set period (usually a calendar year) lapses and is no longer available.  Typically workplace policies specify new amounts of available paid sick time for each successive annual or other period. It is up to the California employer to decide how much benefit to offer each year or other period.”

The situation may not be so clean-cut. Some workplace policies combine paid vacation days, personal days and sick days into a single “paid time off” policy. In this instance, all such days are an accruing benefit and the employer must pay the amount equal to the earned but unused days at termination. Again, it requires full review of an employer’s exact policies to give a fuller answer in specific circumstances.

For help to employers on how to structure and administer paid vacation, sick and personal day’s policies, please contact our firm’s attorneys Tim Bowles or Cindy Bamforth.