Caution: Cap Rules for Paid Sick Leave, Paid Time Off Differ

Wilber_barbara_rgbWe want to implement a combined vacation and sick leave paid time off (PTO) policy to meet the paid sick leave mandate. An employee will earn and be capped at 48 hours/year. Is this OK?

No. The paid sick leave cap rules and the PTO/vacation policy allowable cap rules are completely different. Although you may use PTO to meet the paid sick leave requirements, the PTO policy still must comply with both the paid sick leave requirements and the vacation/PTO policy rules.

Paid Sick Leave Cap

Under the mandatory paid sick leave law, employers may cap sick leave accrual at 48 hours, or six days (whichever is greater), a year. If an employer separates the vacation policy from its sick leave policy, the mandatory paid sick leave law allows an employer to cap the sick leave accrual at 48 hours, or six days (whichever is greater), and limit the use to 24 hours in the year.

The sick leave is not a vested benefit and accrued hours do not have to be paid out at termination of employment. Reinstatement of accrual may apply in certain circumstances.

Vacation/PTO Cap

In contrast, under vacation/PTO laws, absent a collective bargaining agreement, hours earned for vacation and PTO policies are vested and cannot be forfeited.

The Department of Labor Standards Enforcement (DLSE) does allow an employer to place a cap on the amount of vacation/PTO accrued; however, the accrual may not be capped within the year it is earned or in a very limited time following the earning period.

Pursuant to DLSE guidelines, allowable caps for PTO policies must provide a fair and equitable period for an employee to use accrued PTO. DLSE has found a cap of 1.5 times the PTO hours accrued yearly to be acceptable.

For example, if an employee earns 48 hours of PTO in the year, a valid cap would be 1.5 times the 48 hours, which results in a 72-hour cap. Earned vacation and PTO are never lost and are paid out at termination.

Understand Differences

This article discusses the capping rules for PTO and the sick leave-only policies. It is important to understand the differences between implementing a sick leave-only policy or using a PTO policy to meet the paid sick leave mandate.

Using a cap policy is not required, but if you choose to use a cap, follow the guidelines specific to your chosen method.

Be sure to review the many sick leave articles available on HRCalifornia to make sure you are correctly complying with all the details found in the new law.

The Labor Law Helpline is a service to California Chamber of Commerce preferred and executive members. For expert explanations of labor laws and Cal/OSHA regulations, not legal counsel for specific situations, call (800) 348-2262 or submit your question at

Staff Contact: Barbara Wilber