In most states, private sector employers are not required to provide vacation, whether paid or unpaid, to employees. Therefore, employers have significant discretion in developing vacation and personal leave policies that best fit the needs of their workplace and employees.
For example, California employers have the right to decide when employees may take their vacations and the length of time employees are allowed to be away on vacation.
A California court of appeal has held that an employer in California need not provide paid vacation to its employees; need not provide paid vacation to new employees for a certain period of their initial employment; and may maintain a policy that employees will cease to accrue vacation time in excess of any earned but unused amount in their vacation bank (Owen v. Macy's, Inc., 175 Cal. App. 4th 462 (Cal. App. 2d Dist. 2009)).
If promised, vacation must be granted. Nonetheless, it is important for employers to understand that, if their practices, policies, or statements rise to the level of creating a “promise” of vacation, then the employer may create a binding legal obligation to provide vacation—even when state law would not otherwise require it to do so.
Clear policy language will control. Therefore, even when state law does not expressly require employers to provide vacation, employers should assume that their established policy will control.
For this reason, employers must ensure that vacation accrual, caps, and payout terms are set forth clearly and unambiguously in a written policy available to all covered employees. If there is any ambiguity in the policy, it will likely be interpreted in favor of the employee.