Q: Compensation rate for accrued vacation after salary reduction in CA?
In California, if an employer and employee agree to compensate unused vacation days accrued when the employee's salary was higher, and now the employee's salary has been reduced due to underperformance, at which rate should the vacation days be compensated—at the old higher salary rate or the current reduced salary rate? The employee continues to work for the company with unchanged roles and responsibilities.
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A:
In California, vacation pay is considered earned wages rather than a benefit. When an employee's salary is reduced, the law generally requires that accrued vacation time be paid at the rate in effect when the vacation is taken or paid out.
For vacation days accrued during the period of higher wages but paid out after a wage reduction, California law treats this as deferred compensation. This means the vacation time you earned while working at the higher rate should be compensated at that higher rate, not your current reduced salary rate. This principle is based on the concept that vacation pay represents wages already earned but not yet received.
However, this area can be complex depending on your specific employment agreement and company policies. Some employers might have specific vacation policies that address this situation, but these policies must comply with California labor laws which tend to favor protecting employee compensation rights. You may want to review your employment contract and company handbook, or consult with your HR department for clarification on your specific situation.
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