EmploymentQuestion 36 of 1632

An employee's accrued, unused vacation at termination must be:

a.Forfeited under the company's written policy
b.Paid out at the employee's final rate of pay
c.Carried over into the next calendar year only
d.Paid at the rate in force when it accrued

Explanation

Labor Code §227.3 treats vested vacation as wages, and Suastez holds it vests as it is earned, so on termination all unused vacation is payable at the employee's final rate. A written policy cannot declare it forfeited — that is the specific outcome §227.3 forbids. Carry-over is a legitimate accrual rule while employment continues, but it cannot survive the separation, which is when payment falls due. Paying at the older rate the time accrued at understates the wage: §227.3 fixes the final rate as the measure.

Law Reference: Labor Code §227.3; Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774

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