Use-It-or-Lose-It Is Illegal: Recovering Accrued Vacation and PTO in California

Vacation in California is deferred wages. It cannot expire, and every accrued hour must be paid out at your final rate when you leave.

What California Law Says

Labor Code section 227.3 requires payout of all vested vacation at termination at the final rate of pay. Forfeiture policies are void, though employers may use reasonable accrual caps that pause further earning until time is used.

How to Fight Back, Step by Step

1. Gather your handbook policy and your accrual balances from stubs or the HR portal.
2. Recompute your true balance if the employer applied an illegal use-it-or-lose-it sweep.
3. Multiply the corrected balance by your final hourly rate.
4. Check your final paycheck — missing vacation payout also triggers waiting time penalties.
5. Demand the difference and file if unpaid.

Common Questions

My company calls it unlimited PTO. Do I get a payout?

Usually no accrual means no payout, but courts scrutinize unlimited policies that operate like accrual systems in practice.

Floating holidays and personal days too?

If they can be used for any purpose like vacation, they are treated as vacation and must be paid out.