Labor and Employment

Vacation Time After Leaving an Employer

By Lisa Guerin, ​J.D., Boalt Hall at the University of California at Berkeley
Many states require employers to pay employees for their unused vacation or PTO when they leave the company.

When you leave your job, your employer owes you a final paycheck for all of the work you performed before you quit or were laid off or fired. Federal law does not require employers to provide paid vacation time to workers or to pay out unused vacation at the end of employment. State laws generally don’t require employers to provide vacation time either. However, if employers choose to provide vacation time, many states require employers to pay out unused vacation time when the employee leaves.

State Laws Vary on Vacation Time

Most states require employers to pay out unused vacation time when employment ends, at least in some situations. In some states, including California and Illinois, employers must always pay out unused vacation time when an employee leaves. In some states, however, employers must pay out vacation only if required by the employer’s policies or by a contract with the employee. Otherwise, the employer is generally free to decide whether or not to pay you for unused vacation.

If your employer has a paid time off (PTO) policy, rather than separate allowances for vacation and sick leave, it will generally all count as vacation time. If your state’s law gives you the right to be paid for unused vacation, you have the right to be paid for all of your unused PTO.

Check Your Company's Policy

Most workers are at-will employees. This means that the employee or the employer is free to end the relationship at any time, for any reason that is not illegal. However, some employees have employment contracts governing the terms of the relationship. (To learn more about how contracts are formed, see Employment Contracts Trump At-Will Employment.)

If you have an employment contract that promises payment for unused vacation time, your employer must follow the terms of the agreement. However, if you quit without notice or have been fired for disciplinary reasons, the contract might limit your right to collect vacation pay. If you don’t have an employment contract, or your contract doesn’t address the issue of vacation pay, check your employee handbook to see if your employer has a policy of paying out unused vacation.

Ask Your State Labor Department for Help

If your state requires your employer to pay you for unused vacation time, you should receive it with your final paycheck. If you don’t, send your employer a letter requesting your vacation pay immediately. If the employer doesn’t correct the problem, you may file a wage claim with your state’s labor department. In some states, such as California, you can collect a late payment penalty from your employer for each day that your vacation goes unpaid.

File your complaint as soon as possible: Each state has its own deadlines for filing wage claims. Although a time limit of two to three years is common, your state may give you less time. No matter how long you have to file, it’s best to make your claim right away, before evidence gets lost and witnesses move on. To locate your state agency, see State Labor Department Websites.

You May Need to File a Lawsuit

In some situations, you may need to file a lawsuit asking a court to order your employer to pay you for your unused vacation time. In some states, for example, you may file a wage claim only if the amount you are owed is less than a certain dollar limit. If the amount your employer owes falls within your state’s small claims court limit (anywhere from $3,000 to $25,000), you may be able to represent yourself in small claims court. For larger amounts or cases in which you other legal claims against your employer (for unpaid overtime or wrongful termination, for example), you should consider hiring a lawyer.

An Employment Lawyer Can Help

Whether you are entitled to unused vacation pay depends on your state’s law, your employer’s policies, and any employment contract that you may have. An experienced employment lawyer can explain your state’s rules, assess the facts of your case, and help you decide on the best strategy for asserting your rights. And, if you decide to file a wage claim or lawsuit, a lawyer can represent you in negotiations, hearings, and court.

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