The Dosaj Firm, APC | November 2026
Why Sick Leave and PTO Policies Deserve Your Attention
Paid sick leave and paid time off are among the most common sources of wage and hour claims against California employers, and also among the easiest to get wrong. A single handbook provision applies to every employee, every pay period. If that provision is out of step with California law, the violation can give rise to claims on behalf of the entire workforce, as a Private Attorneys General Act (PAGA) notice or a class action.
Handbooks borrowed from other states, policies written before the law changed, and policies that look generous but contain a forfeiture or a waiting period are the usual culprits. Many of these problems are invisible until a former employee or a plaintiff’s lawyer points them out.
This article walks through the core rules, the practical options for building a compliant policy, sample handbook language, and how PAGA penalties apply when sick leave rules are violated. It is current as of the date above, but California law in this area changes frequently. The sick leave minimums were raised effective January 1, 2024, and the list of covered purposes for leave has been expanded more than once since. Some cities and counties also impose their own, more onerous requirements. If you have questions about whether your policies comply, please contact The Dosaj Firm, APC.
General Principles
Sick leave must be paid
Under the Healthy Workplaces, Healthy Families Act of 2014 (Labor Code sections 245 to 249), an employee who works in California for the same employer for 30 or more days within a year of starting work is entitled to paid sick days. (Lab. Code, § 246, subd. (a)(1).) “Paid sick days” means time compensated at the same wage the employee normally earns during regular work hours. (Lab. Code, § 245.5, subd. (e).) Key requirements include:
• Use. Employees may begin using accrued sick leave on the 90th day of employment. (§ 246, subd. (c).) The employer must provide it on an oral or written request. (§ 246.5, subd. (a).) The employer may not require the employee to find a replacement. (§ 246.5, subd. (b).)
• Purposes. Leave must be available for diagnosis, care, or treatment of an existing health condition, or preventive care, for the employee or a family member, and for specified purposes related to victims of crime and abuse. Family members include children, parents, spouses, registered domestic partners, grandparents, grandchildren, siblings, and one “designated person” per 12-month period. (§§ 245.5, subd. (c), 246.5, subd. (a).)
• Rate of pay. For nonexempt employees, sick pay must be calculated using the regular rate of pay for the workweek in which the leave is used, or by dividing total non-overtime wages by total hours worked in the full pay periods of the prior 90 days. Exempt employees are paid as the employer calculates other paid leave. (§ 246, subd. (l).)
• Increments. The employee decides how much leave to use, subject to a minimum increment the employer sets, not to exceed two hours. (§ 246, subd. (k).)
• Notice and records. The available balance of sick leave must appear on the wage statement or in a separate writing provided on payday. (§ 246, subd. (i).) Records of hours worked and sick days accrued and used must be kept for at least three years, and if records are inadequate the employee is presumed entitled to the maximum accruable amount unless the employer proves otherwise by clear and convincing evidence. (§ 247.5, subd. (a).)
• No retaliation. An employer may not deny the use of accrued sick days or discipline or discriminate against an employee for using or requesting them. Adverse action within 30 days of a complaint or protected activity carries a rebuttable presumption of retaliation. (§ 246.5, subd. (c).) Counting sick days as “occurrences” under an attendance policy is a violation.
Unused sick leave generally need not be paid out when employment ends, but it must be reinstated if the employee is rehired within one year. (§ 246, subd. (g).)
PTO, if given, is a form of wages
California does not require employers to provide paid vacation. (McPherson v. EF Intercultural Foundation, Inc. (2020) 47 Cal.App.5th 243, 259.) But once an employer promises it, the law treats it as earned compensation. The California Supreme Court held in Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, 779 to 784, that vacation pay “is not a gratuity or a gift, but is, in effect, additional wages for services performed,” that a proportionate right to it “vests” as the labor is rendered, and that it must be paid at termination.
Labor Code section 227.3 codifies the result: where an employer policy provides paid vacation, all vested vacation must be paid as wages at the employee’s final rate when employment ends, and a policy “shall not provide for forfeiture of vested vacation time upon termination.” A policy that requires an employee to be employed on an anniversary date, or that refuses to prorate, runs directly into Suastez. Courts apply the same rule to a general PTO bank, because PTO that can be used for vacation is vacation.
Neither can be forfeited, but caps can apply
Sick leave. Accrued, unused sick leave carries over to the next year. (§ 246, subd. (d).) Employers can protect themselves in two ways. First, they may limit use to 40 hours or five days per year. (§ 246, subd. (d).) Second, they may cap total accrual at 80 hours or 10 days, so long as employees’ rights to accrue and use leave are not otherwise limited. (§ 246, subd. (j).) The one exception to carryover is the lump-sum option discussed below: an employer that provides the full amount at the start of each year need not provide accrual or carryover.
PTO. “Use it or lose it” policies are unlawful, because they forfeit vested wages. (McPherson, 47 Cal.App.5th at pp. 260 to 261.) But an employer may stop further accrual once an employee reaches a reasonable, announced maximum, because once the cap is reached “no more vacation is earned” and so “no more vests.” (Boothby v. Atlas Mechanical, Inc. (1992) 6 Cal.App.4th 1595, 1602, as described in McPherson, at pp. 260 to 261.) The cap must be clearly communicated in advance, and the Labor Commissioner’s position, as quoted in McPherson (at p. 264), is that an employee “must be given a fair opportunity to take vacation at reasonable periods of time so that he or she can stay below the cap.” An employer may also adopt a clearly written waiting period before vacation begins to accrue. (Owen v. Macy’s, Inc. (2009) 175 Cal.App.4th 462; Minnick v. Automotive Creations, Inc. (2017) 13 Cal.App.5th 1000; McPherson, at p. 261.) That option is generally unavailable for any PTO that is also being used to satisfy the sick leave requirements.
PTO can be used to cover sick days
An employer need not provide separate sick leave if it has a paid leave or PTO policy that makes leave available for the same purposes and under the same conditions as the statute and that satisfies the statute’s accrual, carryover, and use requirements. (§ 246, subd. (f)(1).) Many employers use a single PTO bank for this reason. It simplifies administration, but it carries a trade-off: because PTO is treated as vacation under section 227.3, the entire PTO balance, including the portion that doubles as sick leave, is generally payable on termination. Employers that keep sick leave in its own bank avoid paying out that portion.
Options for Compliance
Sick leave
Option 1: Accrual over time
The default method is accrual of at least one hour of paid sick leave for every 30 hours worked, beginning on the first day of employment. (§ 246, subd. (b)(1).) Exempt administrative, executive, and professional employees are deemed to work 40 hours per week unless their normal workweek is shorter. (§ 246, subd. (b)(2).) An employer using this method must allow carryover, may cap total accrual at 80 hours or 10 days, and may limit use to 40 hours or five days per year.
Employers may use a different accrual formula if it is applied on a regular basis and yields no less than 24 hours of accrued leave by the 120th calendar day of employment (or each year) and no less than 40 hours by the 200th calendar day of employment (or each year). (§ 246, subd. (b)(3).) An employer may also satisfy the accrual requirements by making 24 hours or three days available by the 120th day and 40 hours or five days available by the 200th day. (§ 246, subd. (b)(4).) These alternatives are lawful, but they leave less room for error than the one-for-30 formula and should be reviewed carefully before adoption.
Option 2: Lump sum each year
The simplest method to administer is to provide the full amount of leave at the start of each year of employment, calendar year, or 12-month period. If the employer does so, no accrual or carryover is required. (§ 246, subd. (d).) Since January 1, 2024, the “full amount of leave” is five days or 40 hours. (§ 246, subd. (d).)
Pay attention to “days” versus “hours.” The Labor Commissioner has long read this type of “hours or days” minimum as meaning whichever is greater for the particular employee. In a 2015 opinion letter addressing the then-applicable 24 hours or three days, the Division of Labor Standards Enforcement (DLSE) explained that a “day” is the employee’s regular workday, so an employee who works 10-hour shifts must receive three 10-hour days (30 hours), while an employee on six-hour shifts still receives the 24-hour floor. (DLSE Opn. Ltr. (Aug. 7, 2015), Dovi to Blaine.) The DLSE’s current poster applies the same formulation to the current minimum: five days or 40 hours, “whichever is greater.” (DLSE, Paid Sick Leave poster (rev. 1/2026).) An employee on 10-hour shifts therefore needs 50 hours of sick leave, not 40.
Three further cautions apply to the lump-sum approach. The full amount must actually be available, not merely promised. The employer must still show the balance on the wage statement or a separate writing. And because there is no carryover, employees’ unused balances reset each year, so the policy should say so plainly.
Sample handbook language: paid sick leave
The following is a starting point only. Bracketed items are choices the employer must make, and the language must be tailored to the employer’s workforce, pay practices, and any applicable local ordinance.
SAMPLE A: PAID SICK LEAVE (ACCRUAL METHOD)
Eligibility. Employees who work in California for 30 or more days within a year from the start of employment are eligible for paid sick leave.
Accrual. Employees accrue one hour of paid sick leave for every 30 hours worked, beginning on the first day of employment. Exempt employees accrue paid sick leave as if they work 40 hours per week, unless their normal workweek is shorter, in which case accrual is based on that workweek.
Use. Employees may begin using accrued paid sick leave on their 90th day of employment. Paid sick leave may be used in increments of [one hour / two hours]. The Company may limit an employee’s use of paid sick leave to 40 hours, or the number of hours in five of the employee’s regular workdays, whichever is greater, in each [calendar year / 12-month period].
Carryover and cap. Unused accrued paid sick leave carries over from year to year. Accrual stops when an employee’s balance reaches 80 hours, or the number of hours in ten of the employee’s regular workdays, whichever is greater, and resumes when the balance falls below that amount.
Permitted uses. Upon an employee’s oral or written request, paid sick leave may be used for: (1) diagnosis, care, or treatment of an existing health condition of, or preventive care for, the employee or the employee’s family member; and (2) any other purpose for which California law requires paid sick leave, including certain purposes related to victims of crime, domestic violence, sexual assault, and stalking, as described in Labor Code section 246.5 and Government Code section 12945.8. “Family member” means a child, parent, spouse, registered domestic partner, grandparent, grandchild, sibling, or one designated person per 12-month period identified by the employee when requesting leave.
Notice. If the need for leave is foreseeable, employees must give reasonable advance notice. If the need is unforeseeable, employees must give notice as soon as practicable. Employees are not required to find a replacement worker as a condition of using paid sick leave.
Pay. Paid sick leave is paid at the employee’s regular rate of pay for the workweek in which the leave is taken, and is paid no later than the payday for the next regular payroll period.
Balance. The employee’s available paid sick leave balance is shown on each itemized wage statement.
Separation. Accrued, unused paid sick leave is not paid out when employment ends. If an employee is rehired within one year of separation, previously accrued and unused paid sick leave will be reinstated.
No retaliation. The Company will not deny an employee the right to use paid sick leave, and will not discipline, discharge, or otherwise retaliate against an employee for using or requesting paid sick leave, filing a complaint, or participating in an investigation. Paid sick leave will not be counted as an absence or occurrence under any attendance policy.
PTO
Option 1: No PTO
The simplest way to avoid PTO risk is not to offer PTO. California does not require paid vacation. An employer that provides only statutory paid sick leave, paid holidays, and unpaid time off has no section 227.3 payout obligation, no vacation cap to administer, and no vesting disputes. The trade-off is competitive: many employees, particularly in a tight labor market, expect paid vacation. If you choose this route, make sure your handbook does not describe sick leave as general time off, and that it is not used informally for vacation, since informal practice can create an implied vacation policy. (See McPherson, 47 Cal.App.5th at pp. 262 to 266 [implied policy found where employer never put its time-off arrangement in writing].)
Option 2: Compliant PTO practices
Employers that offer PTO or vacation can do so lawfully by following these principles:
• Treat PTO as earned wages. Accrue it as hours are worked, never require continued employment on an anniversary date, and pay all accrued, unused time at the final rate of pay on termination. (§ 227.3; Suastez, 31 Cal.3d at p. 784.) Failing to include vested PTO in final pay can also expose the employer to waiting time penalties of up to 30 days of wages under Labor Code section 203.
• Never use “use it or lose it.” Instead, adopt an accrual cap and announce it in writing in advance. Set the cap high enough, and schedule PTO flexibly enough, that employees have a real opportunity to use their time and stay below it.
• If PTO is also your sick leave, build in the statutory floor. The PTO policy must accrue at least as fast as the sick leave schedule, allow carryover, permit use for every sick leave purpose without a replacement requirement, allow the same 90-day use rule, pay at the sick leave rate, and avoid any cap below 80 hours or 10 days. (§ 246, subd. (f)(1).) Do not apply a waiting period before PTO accrues, and do not require supervisor approval for leave that is protected sick leave.
• Be careful with “unlimited” PTO. McPherson held that an informal, unwritten “unlimited” arrangement still triggered section 227.3, because the employer never told the employees the policy was unlimited, never put it in writing, and in practice employees could take only a modest, fixed amount of time. (47 Cal.App.5th at pp. 262 to 267.) The court expressly did not hold that all unlimited policies trigger a payout. It suggested that a truly unlimited policy might fall outside section 227.3 if it (1) states in writing that time off is not additional wages for services performed but part of a flexible work arrangement; (2) spells out the rights and obligations of employer and employee, including the consequences of failing to schedule time off; (3) in practice gives employees a sufficient opportunity to take time off or work fewer hours; and (4) is administered fairly, so it does not become a de facto use-it-or-lose-it policy or produce inequities between employees. (Id. at pp. 268 to 269.) The court expressly left open whether such a policy would avoid section 227.3, so any unlimited policy carries risk. Sick leave rules apply regardless, and the wage statement should show the balance as “unlimited.” (§ 246, subd. (i).)
Sample handbook language: PTO
SAMPLE B: PAID TIME OFF (COMBINED PTO AND SICK LEAVE)
Purpose. Paid time off (“PTO”) may be used for vacation, personal needs, and any purpose for which California law provides paid sick leave. PTO satisfies the Company’s obligations under California’s paid sick leave law.
Accrual. Eligible employees accrue PTO at the rate of [one hour for every [20] hours worked], beginning on the first day of employment. [Employer: the rate chosen must not be less than one hour for every 30 hours worked, or must satisfy the alternative schedule in Labor Code section 246(b)(3) or (4).] Exempt employees accrue PTO based on a 40-hour workweek unless their normal workweek is shorter.
Earned wages. Accrued PTO is earned as wages and belongs to the employee. PTO is never forfeited, and the Company does not have a “use it or lose it” policy.
Maximum accrual. To ensure employees have regular opportunities to take time off, employees stop accruing PTO when their balance reaches [160] hours [Employer: not less than 80 hours]. Accrual resumes once the balance falls below that amount. The Company will not unreasonably deny scheduling requests that would allow an employee to stay below the cap.
Using PTO for sick leave purposes. Employees may use PTO beginning on their 90th day of employment for diagnosis, care, or treatment of an existing health condition of, or preventive care for, the employee or a family member, and for any other purpose for which California law requires paid sick leave. No approval is required for these purposes, but employees must give reasonable advance notice when the need is foreseeable and notice as soon as practicable when it is not. Employees are not required to find a replacement. PTO may be used in increments of [one hour / two hours]. PTO used for sick leave purposes will not be counted as an absence or occurrence under any attendance policy.
Using PTO for other purposes. Requests to use PTO for vacation or other personal reasons should be submitted at least [two weeks] in advance and are subject to approval based on business needs.
Pay. PTO is paid at the employee’s regular rate of pay for the workweek in which it is used [for exempt employees: at the employee’s regular salary], no later than the payday for the next regular payroll period. The employee’s PTO balance appears on each itemized wage statement.
Separation. When employment ends for any reason, all accrued and unused PTO will be paid in the final paycheck at the employee’s final rate of pay, as required by law.
No retaliation. The Company will not deny the use of PTO for sick leave purposes or retaliate against any employee for requesting or using it.
Sick Leave and PAGA Penalties
Wood v. Kaiser Foundation Hospitals (2023) 88 Cal.App.5th 742
For several years after the sick leave law took effect, employers defending PAGA claims had a threshold argument based on the Act’s remedies provision, Labor Code section 248.5, subdivision (e), which says that “any person or entity enforcing this article on behalf of the public as provided for under applicable state law shall, upon prevailing, be entitled only to equitable, injunctive, or restitutionary relief.” Because PAGA plaintiffs seek only civil penalties, several federal district courts concluded that this language barred PAGA claims for sick leave violations entirely.
Wood rejected that argument. Ana Wood, a nonexempt Kaiser employee, filed a PAGA action alleging, among other things, that Kaiser violated the Act by not paying sick leave at the correct rate and by wrongfully denying employees the right to use sick leave. The trial court sustained Kaiser’s demurrer to the sick pay claim without leave to amend, reasoning that a PAGA action is brought “on behalf of the public” and seeks only civil penalties. The Court of Appeal (Fourth District, Division One) reversed on February 24, 2023.
The appeals court held that the phrase “on behalf of the public as provided for under applicable state law” refers to actions under the Unfair Competition Law (UCL), not PAGA. Its reasoning rested on several points:
• PAGA actions are brought on behalf of employees. Although a PAGA plaintiff acts as the state’s proxy, the PAGA statute itself describes the action as one brought “on behalf of himself or herself and other current or former employees.” From the Legislature’s perspective, a PAGA action is not an action “on behalf of the public,” a phrase associated with UCL actions.
• Legislative history. The language traces back to a 2008 bill whose standing provision listed state officials, aggrieved persons, and “another person or entity acting on behalf of the public as provided for under applicable state law.” That last category would have been redundant of aggrieved persons if it meant PAGA, but it added something real if it meant UCL actions by local prosecutors. The remedy limit to “equitable, injunctive, or restitutionary relief” matches the UCL’s remedies.
• Section 245, subdivision (b). When the Legislature deleted the Act’s private right of action in 2014, it added a provision stating that the Act is “in addition to and independent of any other rights, remedies, or procedures available under any other law” and does not “diminish, alter, or negate” the rights available to an “aggrieved person.” The court observed that PAGA uses the same “aggrieved” terminology, and concluded that the Legislature meant to preserve PAGA.
• PAGA applies without a private right of action. PAGA is a procedural device that applies to Labor Code penalty provisions even where the statute provides no private right of action and even where the provision on its face authorizes only the Labor Commissioner to collect penalties.
• Policy. Given the Legislature’s documented finding that state agencies cannot adequately enforce labor laws, the court found it “inconceivable” that the Legislature meant to bar PAGA enforcement of the Act, which would leave it as “statutory cotton candy.”
The court also rejected Kaiser’s argument that allowing PAGA claims conflicts with section 246, subdivision (i), which provides that the penalties for a deficient sick leave notice are “in lieu of” wage statement penalties under section 226. And it declined to follow the federal district court decisions on the other side, finding they contained no serious statutory analysis.
Wood is a procedural ruling on a demurrer. It does not decide whether any particular policy violates the Act or how much a PAGA plaintiff may recover. But it is a published Court of Appeal decision, and it removed the principal threshold defense that employers had relied on. Employers should assume that a sick leave violation can be the basis of a PAGA claim.
How PAGA penalties apply to sick leave claims
What a PAGA claim can recover. PAGA creates a cause of action for civil penalties only, not for the unpaid sick pay itself. (See Wood, 88 Cal.App.5th at p. 750, fn. 3 [citing ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175, 188].) An employee suing under PAGA does so as the state’s proxy for all “aggrieved employees” who suffered the same violation, so one policy defect can implicate every employee subject to it. Before filing, the employee must submit a notice to the Labor and Workforce Development Agency and the employer. (Lab. Code, § 2699.3.) Civil penalties are split 65 percent to the state and 35 percent to the aggrieved employees, and a prevailing employee is entitled to reasonable attorney’s fees and costs. (§ 2699, subds. (k)(1), (m).)
Typical sick leave theories. PAGA notices in this area commonly allege:
• sick leave accrued or provided at less than the statutory minimum;
• sick pay calculated at the wrong rate, for example by leaving out shift differentials, commissions, or non-discretionary bonuses that belong in the regular rate (the theory pleaded in Wood and in Hirdman v. Charter Communications, LLC (2025) 113 Cal.App.5th 376 [PAGA claim that sick pay for an outside salesperson was calculated under the wrong method; employer prevailed because the exempt-employee calculation applied]);
• late payment of sick pay, or denial or discouragement of its use, including attendance policies that penalize sick days;
• improper caps, use-it-or-lose-it provisions, or a failure to carry over accrued time;
• failure to keep adequate records, which can create a presumption that employees are owed the maximum accrual (§ 247.5, subd. (a)); and
• retaliation for using sick leave.
The penalty measure. No published decision yet resolves which penalty a PAGA plaintiff may recover for a sick leave violation. The answer depends on how the monetary provisions of the sick leave statute are classified. PAGA allows recovery of civil penalties only, meaning penalties that would otherwise be assessed and collected by the state’s labor agencies. (Lab. Code, § 2699, subd. (a); ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175.) Courts distinguish those civil penalties from “statutory penalties,” which are payable to employees and are generally not recoverable under PAGA. If a Labor Code penalty is not expressly denominated a “civil penalty,” it is commonly treated as a statutory penalty. (Villacres v. ABM Industries Inc. (2010) 189 Cal.App.4th 562, 579; Lopez v. Friant & Associates, LLC (2017) 15 Cal.App.5th 773, 780 to 781; Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365, 377 to 378.)
The sick leave statute contains three monetary provisions, and none of them is labeled a “civil penalty”:
• Administrative penalties payable to the employee (§ 248.5, subd. (b)). If sick days were unlawfully withheld, the Labor Commissioner may order three times the amount withheld, or $250, whichever is greater, up to $4,000 in the aggregate. If the violation causes other harm, such as a discharge, the penalty includes $50 per day, also capped at $4,000. These amounts go to the employee. The California Supreme Court recently confirmed that employees may raise sick leave claims, including these penalties, in the Labor Commissioner’s wage claim process and in an employer’s appeal from it. (Iloff v. LaPaille (Aug. 21, 2025, S275848) 573 P.3d 1100 , 335 Cal.Rptr.3d 718.) In a footnote, the court described Wood and added that a PAGA action “does not allow an employee to seek relief equivalent to that available through the Berman process,” because a PAGA plaintiff “may recover only civil penalties that would otherwise be assessed and collected by the state.” (Id., slip opn., p. 27, fn. 5.) That comment is not a holding, but it indicates that these employee-directed amounts are likely not recoverable through PAGA.
• Liquidated damages payable to employees (§ 248.5, subd. (e)). In a civil action by the Labor Commissioner or the Attorney General, up to $50 per employee per day (capped at $4,000), plus three times the sick pay withheld or $250, whichever is greater. These amounts also go to employees, and the same reasoning applies.
• A sum payable to the state (§ 248.5, subd. (c)). The Labor Commissioner may order a violating employer to pay the state up to $50 for each day a violation continues, for each affected employee, “in compensation to the state for the costs of investigating and remedying the violation.” This is the provision closest to a state-directed civil penalty, although the statute does not call it one.
If none of these provisions is a civil penalty, Labor Code section 2699, subdivision (f), supplies one. It establishes a default civil penalty for “all provisions of this code except those for which a civil penalty is specifically provided”: $100 per aggrieved employee per pay period, reduced to $50 for an isolated, nonrecurring event, and increased to $200 if the employer was previously found to have an unlawful policy within five years or the court finds its conduct malicious, fraudulent, or oppressive. (§ 2699, subd. (f)(2).) Penalties are halved when employees are paid weekly. (§ 2699, subd. (o).)
In favor of employers, courts retain discretion to reduce a PAGA award that would be unjust, arbitrary, and oppressive, or confiscatory. (§ 2699, subd. (e)(2).) Further, an employer is not assessed penalties or liquidated damages under the sick leave statute for an “isolated and unintentional payroll error or written notice error that is a clerical or an inadvertent mistake,” and the factfinder may consider whether the employer had adopted and was following a fully compliant set of policies, procedures, and practices before the violation. (§ 248.5, subd. (h).)
An illustration of the exposure. Suppose an employer with 100 employees paid biweekly (26 pay periods per year) pays sick leave at the wrong rate throughout the one-year PAGA limitations period. If the default measure applies, at $100 per employee per pay period the theoretical maximum is $100 x 100 x 26 = $260,000, before attorney’s fees and any other claims. This is an illustration only. Actual outcomes depend on the facts, the court’s discretion, and negotiated resolution, and in practice PAGA cases are resolved well below theoretical maximums. But the arithmetic shows how a small payroll error becomes a six-figure problem when it repeats across a workforce and across pay periods.
PTO violations. A policy that forfeits vested PTO, or a failure to pay it at termination, violates section 227.3. Section 227.3 does not itself specify a penalty, so a PAGA plaintiff would again look to the default measure, in addition to the individual wage and waiting time claims (Lab. Code, §§ 201 to 203) that departing employees can bring. A PTO policy with a forfeiture provision is also a textbook class action claim, because the policy is uniform and the legal question is the same for every affected employee.
Next Steps
A sick leave and PTO policy review is one of the most cost-effective compliance steps an employer can take. At a minimum, check that your handbook (1) provides at least the statutory accrual or lump-sum amount, (2) has no forfeiture or use-it-or-lose-it provision, (3) pays PTO out at termination, (4) calculates sick pay at the correct rate, (5) shows balances on wage statements, and (6) does not penalize sick leave under any attendance policy. Then confirm that payroll is actually doing what the handbook says, since a compliant policy that payroll does not follow offers little protection.
California law in this area changes frequently, and local ordinances can add requirements. If you would like us to review your policies or have questions about compliance, please contact The Dosaj Firm, APC at (213) 310-1905, or at 626 Wilshire Blvd., Suite 410, Los Angeles, California 90017.
This article is provided for general informational purposes and is not legal advice. Reading it does not create an attorney-client relationship. Laws change, and the application of the law depends on the facts of each situation.
