Federal law does not address the issue of vacation pay or its payment to employees. However, California addresses the issue under state law.

In California, a “Use-it-or-lose-it” policy (where employees cannot carry over vacation time year-to-year) is completely illegal. As soon employees earn vacation time, it is their property and they cannot forfeit it under any circumstances.

Therefore, at the time of termination, employees must receive a check for all vacation pay earned but not used.