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Unused PTO in California: must it be paid out?

Accrued, unused vacation is wages and must be paid at separation (Cal. Lab. Code § 227.3). Use-it-or-lose-it forfeiture without a vested cap is not enforceable.

The practical question is not whether your employer has a policy — most do — but whether that policy actually forfeits earned time, and whether it was communicated before you earned it.

Statute: Cal. Lab. Code §§ 201, 202, 203; § 227.3 (vacation); § 200 (wages)
If fired: Wages earned and unpaid are due and payable immediately at the time of discharge (Cal. Lab. Code § 201).
If you resigned: If you gave at least 72 hours' notice, final pay is due at the time you quit (§ 201). If you gave less than 72 hours' notice, final pay is due within 72 hours (§ 202).
Late-pay penalty: Waiting time penalty under § 203: wages continue at your daily wage rate for each day payment is late, up to 30 calendar days. The daily rate is your total unpaid wages divided by the number of days worked in the final pay period.
PTO: Accrued, unused vacation is wages and must be paid at separation (Cal. Lab. Code § 227.3). Use-it-or-lose-it forfeiture without a vested cap is not enforceable.
Small claims limit: $12,500 for an individual
Last verified: 2026-11-03 two sources agree

What to put in the file before you write anything

Your accrual balance on the last day of work, from the payroll system rather than from memory.
The policy in force during your employment, with its effective date — a policy adopted after you accrued time is a weaker defence for the employer.
Whether the policy says "use it or lose it", caps accrual, or is silent. Silence usually favours the employee.
The payout rate: accrued hours are normally paid at your final rate of pay, not at an older, lower rate.

What the letter does that a phone call cannot

A demand letter fixes three things at once: the amount, the date each item was due, and the date the employer was on notice. Every forum that can help you — the California Labor Commissioner's Office (DIR), a small claims judge — starts from those three facts. The letter is built from Cal. Lab. Code §§ 201, 202, 203; § 227.3 (vacation); § 200 (wages) and your own figures, so the deadline it states is the one that applies to your separation, not a generic thirty days.

If the amount fits inside $12,500, small claims court is usually faster than an agency queue; if it does not, the agency route and a demand first is the cheaper path.

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Questions

Does California law require vacation payout?

Accrued, unused vacation is wages and must be paid at separation (Cal. Lab. Code § 227.3). Use-it-or-lose-it forfeiture without a vested cap is not enforceable.

Can my employer retroactively cancel my PTO balance in California?

A forfeiture has to come from a policy that applied while the time was being earned. A policy introduced at separation, or applied only to departing employees, is the weakest version of the argument and is worth challenging in writing.

Other situations in California

being fired · resigning · a layoff · unpaid commissions · all California rules

Reviewed 2026-11-03 against the sources listed on the California page. This is a self-help document tool, not legal advice, and no outcome is guaranteed.