Employers are not required by law to offer paid vacation time, but many do. According to the most recent numbers from the Bureau of Labor Statistics, more than 90% of full-time employees in private industry get some paid vacation time, as do more than a third of part-time employees. Because employers aren't legally required to offer paid vacation at all, they have a lot of leeway in how they administer their programs. However, employees do have some rights when it comes to vacation time.
Who Gets Vacation
Generally, employers are free to decide whether to offer vacation, whom to offer it to, and how much to offer. For example, many employers offer vacation only to full-time employees, as the figures above show. Some employers offer more vacation time to employees who have been with the company longer, or make different vacation programs available to employees in different positions.
What an employer may not do, however, is discriminate in providing vacation time. For example, an employer may not make decisions about how much vacation to provide (or whether to provide it at all) based on race, gender, religion, or other protected characteristics. An employer also may not discriminate in applying its rules for using vacation. For example, an employer may not require employees with disabilities to give more notice when they wish to use vacation time, or allow only female employees to use their vacation time in less than full-day increments (on the assumption that women are more likely to have child care responsibilities, and therefore more likely to need only a few hours off to attend a school conference or take a child to the dentist).
Learn more about Vacation and Sick Days.
Rules for Accruing Vacation
Employers may also adopt their own rules on when and how employees accrue vacation, and how much. For example, many employers have programs in which employees accrue their annual vacation allotment a bit at a time. Other employers award employees their full annual vacation time all at once, at the start of the year. Some employers don't allow employees to accrue vacation for their first few months; some allow employees to accrue time off from the start of their employment, but don't allow them to use it until they've been with the company for a set period of time. Companies have adopted a wide variety of rules in this area.
However, there is a legal limit on the policies an employer may adopt regarding vacation usage and caps, at least in some states. Generally, employers are free to cap how much vacation an employee may accrue. Once an employee reaches the cap, the employee won't earn any more vacation until the employee uses some. These rules prevent employees from piling up endless days of vacation.
In some states, however, an employer may not take away employee vacation once it is earned. For example, a "use it or lose it" policy, by which employees lose accrued vacation time at the end of the year unless they take it, is illegal in some states. These states consider earned vacation a form of compensation, which belongs to the employee. Although the employer can cap how much vacation the employee can earn, it cannot take away vacation time the employee has already earned. Instead, the employer must allow the employee to use the time or cash it out.
Learn more about Wages and Hours.
A number of states require employers to pay employees for their accrued, unused vacation time when the employment relationship ends. For example, if the employee has six unused days of vacation, those six days must be included as compensation in the employee's final paycheck. Some states require employers to cash out unused vacation in all circumstances. Other states require this only if employers have promised to pay out vacation in their written policies on in a contract with the employee.
Learn more about Taking Time Off Work.