California paid time off law: what employers must do (and what’s optional)
If you’re searching for California paid time off law, you’re likely trying to answer one of two questions: what PTO is legally required in California, and how to structure a compliant PTO policy. The key point is that California does not require employers to provide general “vacation PTO,” but it does require paid sick leave—and once an employer offers vacation or a PTO bank, California treats earned vacation/PTO as wages with strict rules on accrual, carryover, and payout.
For a broader view of California workplace rules beyond PTO, see SwiftSDS’s guide to california employment laws.
What counts as “PTO” under California law?
PTO can mean different things—and the legal rules change
In HR practice, “PTO” may refer to:
- Paid sick leave (legally required in California under state law, and sometimes local ordinances)
- Vacation time (not required by California, but regulated if provided)
- Combined PTO policies (one bank used for sick, vacation, personal days)
Because the compliance obligations differ, it’s important to define your PTO program in writing and ensure managers administer it consistently.
Required paid leave in California: Paid Sick Leave (PSL)
The governing law
California’s required paid sick leave comes from the Healthy Workplaces, Healthy Families Act of 2014 (California Labor Code sections 245–249), as amended.
Who must receive paid sick leave?
In general, employees who work in California for 30 or more days within a year from the start of employment are covered, with limited exceptions. Eligibility to use accrued sick time generally begins after 90 days of employment.
Minimum accrual and frontload options (statewide baseline)
California allows employers to comply via:
- Accrual method (commonly at least 1 hour per 30 hours worked), or
- Frontloading a required amount at the start of a year/benefit period.
California’s sick leave rules have been amended in recent years, and local ordinances can impose higher standards. Because amounts and caps can change, employers should confirm the current statewide minimums and any city/county requirements for the employee’s work location.
If your workforce includes nearby states, it can help to compare frameworks—see arizona sick leave law for a contrasting paid sick time model.
Carryover, usage caps, and permitted uses
California requires that sick time be available for common health and safety-related reasons, including:
- The employee’s own health needs
- Care for covered family members
- Certain “safe time” reasons related to domestic violence, sexual assault, or stalking
Depending on the compliance method you use (accrual vs. frontload), carryover and usage caps may apply, but they must meet California’s minimum requirements and any applicable local rules.
Practical compliance steps for HR
To stay compliant with California sick leave requirements:
- Choose a method (accrual or frontload) and document it in the handbook.
- Track accrual and use accurately (especially for non-exempt/hourly employees).
- Provide required wage statement information (available sick balance must be shown or provided in a compliant alternative written record).
- Train managers on protected sick leave usage and anti-retaliation rules.
Optional PTO in California: Vacation and “PTO banks” are treated as wages
California PTO laws treat earned vacation/PTO as earned wages
California does not force an employer to offer vacation. However, once you provide vacation—or a combined PTO bank that can be used like vacation—California law generally treats earned and vested vacation/PTO as wages under California Labor Code section 227.3.
That creates three major compliance consequences.
1) “Use-it-or-lose-it” vacation policies are not allowed
A true forfeiture policy (where employees lose earned vacation/PTO if they don’t use it by a deadline) is generally unlawful in California because it results in wage forfeiture. Employers typically use alternative tools such as:
- Reasonable accrual caps (employees stop accruing once they hit the cap)
- Scheduling expectations (encouraging time off to avoid hitting the cap)
2) Accrual caps are allowed if they’re reasonable
California permits a cap that stops further accrual once the employee reaches a set balance—so long as the cap is not designed to deprive employees of the ability to take time off. A common approach is:
- Set a cap equal to a multiple of the annual accrual (often 1.5x–2x), then
- Allow accrual to resume once the balance drops below the cap.
3) Payout at separation is required for earned/unused vacation/PTO
When employment ends (voluntary or involuntary), employers must generally pay out all earned, unused vacation/PTO at the employee’s final rate of pay (or as required by the regular-rate rules that apply). This requirement is a major reason many employers separate “sick leave” from “vacation” or carefully structure combined PTO.
How does PTO work in California for combined policies?
Combined PTO must meet sick leave rules without violating vacation payout rules
A combined PTO policy can work in California, but it requires careful design because:
- The sick leave portion must meet Healthy Workplaces requirements (availability, permitted uses, anti-retaliation).
- The vacation-like portion is treated as wages and must not be forfeited and must generally be paid out at separation under Labor Code 227.3.
Actionable policy tip: If you use a single PTO bank, assume unused balances are payable at termination unless the time is clearly segregated as non-payable sick leave and administered accordingly.
Common pitfalls under California PTO laws (and how to avoid them)
Misclassifying “unlimited PTO”
Some employers offer “unlimited” PTO to reduce accrual tracking and payout. California scrutinizes “unlimited” plans—especially if, in practice, time off is not truly unlimited or is routinely denied. If you use an unlimited model:
- Put clear eligibility and approval standards in writing
- Ensure consistent approvals
- Confirm how separation pay will be handled (consult counsel; outcomes can vary by plan design and facts)
Failing to account for local leave ordinances
Many California cities/counties have paid sick leave ordinances that can exceed the statewide baseline. Ensure your PTO approach accounts for employees who work in multiple jurisdictions or remotely.
Overlooking retaliation and discrimination risks
Discipline tied to legitimate sick leave use can create retaliation claims. Also, leave administration intersects with accommodation and protected-status concerns. For broader compliance context, review anti discrimination laws in california.
Notice and posting obligations (and why they matter)
California leave compliance is not just a policy issue—it’s also a notice issue. Employers must provide required notices and ensure mandatory postings are accessible.
For federal wage-and-hour posting coverage that often accompanies leave compliance audits, maintain the current Employee Rights Under the Fair Labor Standards Act poster (and the Spanish version if applicable: Derechos de los Trabajadores Bajo la Ley de Normas Justas de Trabajo (FLSA)). Public employers should also track the state/local government variant: Employee Rights Under the Fair Labor Standards Act - State and Local Government.
If you’re building a complete California compliance program (beyond PTO), SwiftSDS also maintains related state-law guides such as california 50 dollar minimum wage (useful for pay transparency discussions and internal audits) and even cross-state references like alabama minimum wage for multi-state employers standardizing payroll practices.
PTO policy checklist for California employers (actionable)
Use this checklist when updating or rolling out a PTO program:
- Separate sick leave vs. vacation (or define a compliant combined bank).
- State your accrual rate, waiting period (if any), and usage rules clearly.
- Confirm carryover rules align with California and any local ordinances.
- Remove “use-it-or-lose-it” language for vacation/PTO treated as wages.
- Set a reasonable accrual cap to manage balances without forfeiture.
- Define payout rules at separation (vacation/PTO payouts required under Labor Code 227.3).
- Ensure wage statements show sick leave balance (or provide compliant written notice).
- Train managers on protected leave use, documentation limits, and retaliation risk.
- Maintain required postings/notices and document delivery for remote workers.
FAQ: California paid time off law
Is PTO required in California?
California does not require employers to offer vacation PTO, but it does require paid sick leave under the Healthy Workplaces, Healthy Families Act (Labor Code 245–249). If you offer vacation or a PTO bank, additional California rules apply.
Can California employers have a “use-it-or-lose-it” PTO policy?
Not for earned vacation/PTO. California generally prohibits forfeiture of vested vacation/PTO because it is treated as wages (Labor Code 227.3). Employers typically use accrual caps instead.
Do employers have to pay out unused PTO when someone quits in California?
If the PTO is vacation or vacation-like PTO that has vested, yes—unused balances must generally be paid out at separation under Labor Code 227.3. Pure paid sick leave is typically not paid out (unless your policy promises it), but combined PTO banks often become payable depending on design.
For more HR compliance resources across wage, posting, and policy requirements, start with SwiftSDS’s hub on california employment laws and build your California program from there.