EmploymentQuestion 940 of 1605
Under Labor Code §227.3, when an employee is terminated with accrued, unused vacation, the vacation must be paid:
a.As wages at the employee's final rate of pay, at the time of separation
b.At the rate in effect when the vacation was first earned
c.Never, since vacation is a discretionary benefit
d.Only if the employee worked at least five years
Explanation
Labor Code §227.3 requires that upon termination, all vested vacation be paid as wages at the employee's final rate of pay. There is no minimum-tenure requirement to trigger the payout, and it is paid at the final (not original) rate. Because it is treated as final wages, the timing rules of §201/§202 (and potential waiting-time penalties under §203) also apply.
Law Reference: Labor Code §227.3Practice all 1605 questions free — no signup required.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)