Payment of Unused Vacation Time Upon Separation

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One of the benefits that many workers look forward to is paid vacation time. Taking time off to relax and rejuvenate is essential for maintaining a healthy work-life balance. However, what happens to accrued vacation days when an employee’s employment comes to an end? Here we explore the legal aspects of payment of unused vacation time upon an employee’s separation.

California Labor Laws

In California, employers are obligated to pay employees for accrued vacation time upon termination. According to California Labor Code Section 227.3, earned and unused vacation time is considered wages and must be paid to the employee at their final rate of pay. This regulation applies regardless of whether the employee quits or is terminated.

An Issue that is Easy to Overlook – But Causes Major Legal Headaches

In our experience, employers—even the most well-meaning and conscientious—often overlook the fact that unused vacation time must be paid out when the employee quits or is terminated. The result, all too often, is that employers are hit with penalties that often exceed the value of unused vacation time. Even worse, these sorts of technical violations are the bread-and-butter of plaintiffs’ counsels, who use these violations as a gateway for collective or representative action against an employer more generally.


Understanding the regulations surrounding the payment of unused vacation time upon termination is crucial for both employers and employees. For employees, being aware of their entitlements ensures they receive fair compensation for their earned vacation days when their employment comes to an end. For employers, compliance with applicable laws and policies fosters a positive work environment and helps avoid potential legal issues.

For more information on payment of unused vacation time upon termination, please contact us at

This material is provided for informational purposes only. It is not intended to constitute legal advice, nor does it create a client-lawyer relationship between MNK Law and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material.