In the state of California the answer is usually never. When a worker leaves his or her employment, all vested vacation pay must be paid out at the final rate of pay in accordance with the employer’s vacation policies. Along these same lines, an employer cannot have a “use-it-or-lose-it” policy under which an employee forfeits accrued vacation time if not used by an anniversary date. On the other hand, an employer can cap or limit the amount of vacation time accrued.

California Vacation Laws – ERISA Lawyers

Some employers can skirt the strict California law on vacations by establishing a funded vacation plan under the federal ERISA laws. However, some of these employers do not have vacation plans that comport with the requirements of ERISA, and therefore they are in blatant violation of California law. An employee would need the assistance of an attorney to determine the official ERISA status of an employer.