In a recent California case Rhea v General Atomic, the court approved an employer’s practice of requiring exempt employees to use their vacation or other personal leave hours to cover for partial day absences. In that decision, the court first acknowledged the two well established rules: (1) an employer may not deduct pay from salary for partial day absences of exempt employees, or else the employer runs the risk of facing liability for unpaid overtime, if that employee later successfully argues that he is an hourly employee because the employer deducts wage for hours not worked; and (b) accrued vacation is considered vested wages for all purposes. That’s why accrued, unused vacation should always be included in the final paycheck of a separated employee. This is regardless of what the reason for termination or resignation is.
The court then distinguished a situation where the employer would simply forfeit an employee’s accrued vacation, which would be illegal, as opposed to requiring an employee to use vacation or leave time to cover partial day absence. The court emphasized that “requiring to use” accrued time off is not the same as “taking it away”. The court also pointed out that the employer in this case also did not violate California wage laws because it ended up paying exactly the same salaries to the same employees in question, so no impressible wage shifting took place.