California PTO Payout Laws 2025: Final Paycheck Rules & What Employers Must Pay
Does California require PTO payout when you quit? Learn how California treats vacation as earned wages, what 'use it or lose it' means, and what to expect in your final paycheck.
California has some of the most employee-friendly labor laws in the United States, and its approach to Paid Time Off (PTO) is no exception. While federal law doesn’t require employers to provide paid vacation, California views accrued vacation time as a form of earned wages.
Does California Require PTO?
No, California law does not mandate that employers provide vacation time. However, if an employer chooses to provide paid vacation, they must follow specific rules regarding accrual, caps, and payout.
Note: California does require paid sick leave (Healthy Workplaces, Healthy Families Act of 2014), which is separate from vacation time unless combined into a general PTO policy.
Key Rules for PTO in California
1. Earned Wages Rule
In California, vacation time is considered earned wages. This means:
- No “Use It or Lose It”: Employers cannot implement a policy where you forfeit accrued vacation time at the end of the year.
- Payout upon termination: If you leave your job (quit or fired), you must be paid for all unused, accrued vacation time at your final rate of pay.
2. Accrual Caps
While “use it or lose it” is illegal, employers can place a “reasonable cap” on accrual.
- A common cap is 1.5 to 2 times the annual accrual amount.
- Once you hit the cap, you stop earning more PTO until you use some of it. This is legal because it prevents the liability from growing indefinitely without forfeiting what you’ve already earned.
3. Waiting Periods
Employers can impose a waiting period (e.g., 60 or 90 days) before a new employee starts accruing vacation, or before they can use it. This must be clearly stated in the employee handbook.
Recent Changes (2024-2025)
As of 2024, California expanded Paid Sick Leave requirements:
- Employers must provide at least 5 days or 40 hours of paid sick leave per year (up from 3 days/24 hours).
- Accrual can be 1 hour for every 30 hours worked, or front-loaded.
How to Calculate Your California PTO
If you’re an hourly employee in California, your accrual might be based on hours worked.
Example:
- You earn 1 hour of PTO for every 30 hours worked.
- You worked 120 hours last month.
- Calculation:
120 / 30 = 4 hoursof PTO earned.
Use our Hourly PTO Calculator to check your specific numbers.
Summary
| Policy | Allowed in CA? |
|---|---|
| “Use it or lose it” | ❌ No |
| Accrual Caps | ✅ Yes (Reasonable) |
| Payout on Termination | ✅ Required |
| Waiting Periods | ✅ Allowed |
Related
Disclaimer: This guide is for informational purposes only and does not constitute legal advice. Labor laws can change; always consult the official California Department of Industrial Relations or a labor attorney.