Can we cap how much vacation can accrue? — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Can we cap how much vacation can accrue?

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Q. Our vacation policy caps the amount of vacation employees can earn at 250 hours. Employees can’t earn any more until the vacation balance falls below that level. Does this violate California’s law on accruing vacation?

A. No. Unlike “use it or lose it” policies, which result in a forfeiture of accrued vacation pay, a provision that places a cap or ceiling on vacation pay accruals is acceptable to the Labor Commissioner.

Note, however that the time periods involved for taking vacation must be reasonable. The Division of Labor Standards Enforcement has found vacation policies requiring employees to take vacation in the year it is earned (or in a very limited period following the accrual period) are unfair and will not be enforced by the division.

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