Bad advice, corrected · checked 19 October 2026
In California, use it or lose it vacation is illegal.
Earned vacation is wages under Labor Code 227.3. A policy can't take it away, and unused vacation is paid at the final rate when employment ends.
The short version
In California, earned vacation is wages. Labor Code 227.3 says a policy can't make vested vacation disappear, and it's paid out when employment ends.
The Labor Commissioner says a policy that forfeits unused vacation by a set date is illegal. It's paid at their final rate.
What you can do: set a reasonable cap, so vacation stops accruing at a limit.
Sources
Checked on 19 October 2026.
"an employment contract or employer policy shall not provide for forfeiture of vested vacation time upon termination."
California Labor Code section 227.3. In force 19 October 2026. "a policy that provides for the forfeiture of vacation pay that is not used by a specified date ("use it or lose it") is an illegal policy under California law and will not be recognized by the Labor Commissioner."
Labor Commissioner: vacation FAQ. Read 19 October 2026. "upon termination of employment all earned and unused vacation must be paid to the employee at his or her final rate of pay."
Labor Commissioner: vacation FAQ. Same page.
The same page says an employer can place a reasonable cap on vacation benefits, so vacation stops accruing at a limit. A collective bargaining agreement can provide otherwise.
Watch
Psst posts every video on these channels.