Can California employers set PTO accrual caps?

California employers can't implement use it or lose it policies for employees' PTO. However, employers can place a cap on PTO accrual.

PTO Accrual

Ordinarily, employees accrue paid time off (PTO) as they work. For example, for every one month of work, an employee might gain 2 days of PTO. A PTO accrual cap establishes a limit to the amount of PTO an employee can accrue.

PTO as Wages

California doesn't allow a use it or lose it policy - where employees completely lose any unused PTO. In California, earned vacation days are considered wages and employers, then, can't have employees forfeit those wages, even if the employee is terminated.

Accrual Caps

California employers can place a limit on employees' PTO accrual. This means after an employee reaches a certain number of days, they stop accruing PTO. For example, after an employee earns 150 hours of PTO, they can't earn any more until they use some of that 150 hours. There's no state-determined accrual cap, rather, employers can choose their own cap as long as it is deemed reasonable.

Final Tip

PTO accrual caps are allowed by California employees, as long as the caps are reasonable. Employers can also choose to pay employees for their PTO hours since they are considered wages.

Helpful Links:

Can We Change Our Policy to Limit Carryover of Accrued PTO? - HRDailyAdvisor.com

Leave and Time Off - hr360.com - A general guide to time off policies

California Wage Hour Laws - NOLO.com

Sick Leave: Accrual and Limitations CA.gov - A 2015 act passed about California sick leave

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