California Law Does Not Limit Reach-Back to Recoup Unpaid Vacation

October 12, 2006 by Beeson Tayer & Bodine

California employees have a protected right in their vested vacation pay, and unless the applicable union contract provides otherwise, employees must receive all of their unused, vested vacation upon termination of their employ- ment. This right can be en- forced through the California Labor Commissioner or through a private right of action. The Labor Commis- sioner has long held that ter- minated employees can only collect on vacation accrued during the four years prior to termination, on the theory the employee’s claim to the vacation begins when the vacation is earned, and that this type of claim is subject to a four-year statute of limita- tions. About ten years ago, a California Court of Appeal is- sued a decision agreeing with the Labor Commissioner. A California Court of Appeal has now issued a contrary ruling, holding that employees upon termination are entitled to recover all of their vested vacation, no matter how long previously they earned the vacation. In Church v. Jamison (Oct. 25, 2006), the court reasoned that the Labor Commissioner’s position in effect imposed a “use it or lose it” obligation on employees, an obligation that is contrary to California law.

Generally, where vacation is determined by a union con- tract, claims for unpaid, vested vacation will be brought under the union contract rather than under the California law man- dating payment of vested va- cation upon termination. This decision can be useful even for union contracts, however, if the employer attempts to limit the scope of the employee’s vacation recovery. Remember also that all employees, even those protected by a union contract, are entitled to wait- ing time penalties for wages, including vested vacation pay, not timely paid upon termination.

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