While we cannot provide legal advice in this forum, this answer
provides links to the relevant laws I was able to locate, and a
layman's speculation on what this means. If you have any questions,
please contact a lawyer. (I will be happy to clarify my answer, of
course, but nothing I say should be construed as legal advice. I am
not a lawyer. I don't even own a pair of shiny shoes.) I am assuming
that you are asking from the perspective of the employee. If I'm
wrong, the information should still be valid, but the final section on
filing a dispute won't apply.
That said, I'll give you a short answer and a long answer.
The short answer is that the law states specifically that an employees
are to be compensated for unused vacation time at their final rate of
compensation. It also allows for disputes to be decided by the Labor
And now for the long answer, divided into sections on the Relevant
Laws, How to File a Dispute, Related Laws, and Finding a Lawyer.
The California Labor Code is available online here in its entirety:
It's also available in searchable format here:
If you go down to the section titled "Search California Codes," select
"Labor Code" from the dropdown menu, and then enter 'vacation' as your
search term, it'll provide you with a list of the employment laws that
mention vacation time.
The first link in the list (CALIFORNIA LABOR CODE SECTION 200-243)
addresses your situation. (If you're looking for this in the full text
of the code from the first link, it's under California Labor
Code-->Division 2-->Part 1-->Chapter 1-->Article 1--Section 227.3)
And here is the relevant section of the code:
"227.3. Unless otherwise provided by a collective-bargaining
agreement, whenever a contract of employment or employer policy
provides for paid vacations, and an employee is terminated without
having taken off his vested vacation time, all vested vacation shall
be paid to him as wages at his final rate in accordance with such
contract of employment or employer policy respecting eligibility or
time served; provided, however, that an employment contract or
employer policy shall not provide for forfeiture of vested vacation
time upon termination. The Labor Commissioner or a designated
representative, in the resolution of any dispute with regard to
vested vacation time, shall apply the principles of equity and
While it's never truly safe to assume anything, as a layman, I would
*guess* that this section of the code assumes that the employee's
'final rate' is that employee's highest rate of compensation, with
the potential exception of wage reductions due to just cause. (These
are covered elsewhere in the labor code, but I don't want to clutter
your answer with this unless you're interested. If you would like
links to this, please feel free to ask for a clarification.) The
situation you've described, however, implies that the employee was not
at fault for the reduction in pay, and in accordance with the code,
the Labor Commissioner or a designated representative would hear the
case and make a judgement on the rate of compensation due for the
HOW TO FILE A DISPUTE
The California Labor Standards Enforcement website is here:
and information on filing a wage claim is here:
From the page above:
"An employee or former employee may file an INDIVIDUAL wage claim to
recover:<...>Unused vacation hours that were not paid upon termination
of the employment relationship, e.g., a quit, discharge, or layoff."
This page provides a link to a PDF pamphlet with detailed instructions
on filing a wage claim, as well as a link to the actual form you fill
out. The claim itself cannot be filed online, but must either be
mailed or filed in person.
For background and general information on payment of wages in a
layoff, here are some more links to codes that may be relevant:
"DIVISION 2. EMPLOYMENT REGULATION AND SUPERVISION
PART 1. COMPENSATION
CHAPTER 1. PAYMENT OF WAGES
Article 1. General Occupations
201. (a) If an employer discharges an employee, the wages earned
and unpaid at the time of discharge are due and payable immediately...
(b) Notwithstanding any other provision of law, the state employer
shall be deemed to have made an immediate payment of wages under
this section for any unused or accumulated vacation, annual leave,
holiday leave, or time off to which the employee is entitled by
reason of previous overtime work where compensating time off was
given by the appointing power, provided, at least five workdays prior
to his or her final day of employment..."
Again, though, I would like to reiterate that I am not a lawyer, and
it may be worthwhile for you to locate a lawyer who specializes in
labor disputes before you take any action on this.
HOW TO FIND A LAWYER
If you would do decide to consult with someone first, you can search
for lawyers in your area from this page:
You'll need to enter your state, your city or ZIP code, and a practice
area (Labor Law), and you should be provided with a list of
specialists. (I'd do an initial search for you, but it won't give me
results without a city or ZIP code.)
Before you actually speak to a lawyer, you might want to check out
their record with the state bar association:
This site will allow you to see a lawyer's current status with the bar
association, and any public record of discipline.
And again, if there's anything I've left out here, please feel free to
request a clarification, and I'll get you whatever I can.
Good luck and hang tight,
california "labor and employment"
california "labor commissioner"
california bar association