Unlimited Vacation: HR Dream or Legal Disaster?
Unlimited vacation” sounds like a dream—no accrual tracking, no caps, no payouts upon separation. What’s not to love? Plenty, if you’re in California. Although the concept of unlimited paid time off can offer flexibility and reduce administrative burden, poorly implemented policies can lead to liability, employee resentment, and confusion about time off entitlements. What Is “Unlimited Vacation,” Really? In theory, employees can take as much vacation time as they need, as long as they meet performance expectations. In practice, many “unlimited” policies operate more like “untracked accrual with no payout,” which is risky—especially in California. Under California law, earned vacation is considered wages, and must be paid out upon termination unless the time off truly us discretionary and unlimited in practice. Common Pitfalls We See Calling it “unlimited,” but restricting usage . If you require pre-approval, cap the number of days, or deny most requests, your policy isn’t really unlimi...