Time Off from Work: Principles for Structuring PTO Policies

Author, Jadyn Brandt, Client Communications Coordinator, Rancho Mesa Insurance Services, Inc.

Paid time off (PTO) policies play an important role in how employers structure and support time away from work. Clear and well-documented PTO policies are a necessity for organizations to stay compliant, avoid employee confusion, and ensure proper use of leave time.

In California, the Department of Industrial Relations maintains that there is no legal requirement for an employer to provide PTO to employees (i.e., vacation time), not to be confused with California’s required paid sick leave. However, if an employer chooses to provide PTO, they must adhere to certain restrictions including: PTO accrues as it is earned, and “cannot be forfeited, even upon termination of employment, regardless of the reason for the termination.”

Employers can place a “reasonable cap” on PTO benefits and, “unless otherwise stipulated by a collective bargaining agreement, upon termination of employment all earned and unused vacation must be paid to the employee at his or her final rate of pay.”

Additional California exceptions to PTO:

• Employers can prevent employees from earning PTO during a specific period of time at the start of employment.

• Employers can exclude certain classes of employees including part-time, seasonal, or probationary workers.

• Employers can control the amount of PTO taken at a particular time.

• Employers can pay out employees for all PTO not taken at the end of each year.

Additional California restrictions to PTO:

• Employers cannot enforce “use it or lose it” policies in regards to PTO, the unused balance must either be paid out or rolled over into the following year. However, employers may limit PTO accrual once an employee has hit the established cap.

• Employers cannot deduct “advanced” vacation from an employee’s final paycheck if they quit/are terminated before that vacation is accrued.

Rancho Mesa’s RM365 HRAdvantage™ portal provides PTO resources for businesses across all states. Sample policies are available to be customized to your organization’s protocols and state regulations. Individual states may have additional requirements, so consult an HR expert or attorney who is knowledgeable about your state’s laws.

Updates to California Sick Pay and PTO in 2025

Author, Jadyn Brandt, Client Communications Coordinator, Rancho Mesa Insurance Services, Inc.

Beginning on January 1, 2025, changes to California paid sick leave and paid family leave took effect in California.

Use of Paid Sick Leave Expanded

The use of paid sick leave has been expanded to cover additional reasons for absence including:

• Jury duty

• Appearance in court under a court order as a witness in a judicial proceeding

• Any reason covered under the victim leave law, if the employee or their family member is a victim of any qualifying act of violence (QAOV)

Additionally, agricultural workers whose job description requires them to work outside may use paid sick leave to avoid unsafe smoke, heat, or flooding conditions.

To ensure your business is in compliance with these new requirements, update your paid sick leave policy to include these new uses.

Use of Paid Family Leave Requirements Changed

The requirements for an employee to use paid family leave have also been updated. Employers can no longer require employees to use up to two weeks of accrued, unused vacation time before they are able to receive Paid Family Leave (PFL) from the state.

Employers should update family leave policies to remove any requirement that employees must use accrued vacation time before receiving PFL benefits on or after January 1.

Changes to paid sick leave and Paid Family Leave policies can be made through Rancho Mesa’s RM365 HRAdvantage™ portal by utilizing the Company Policies/Handbooks feature.

For more information on other important changes to California employment law, register for Rancho Mesa’s 2025 Employment Law Update webinar.