Vacation Accrual While Receiving Workers' Compensation in California

Legal Framework in California

California law does not automatically suspend vacation accrual when an employee is on workers' compensation (WC) leave. Vacation is considered earned wages, and under the California Labor Code, earned vacation cannot be taken away. However, the specific impact depends on the employer's written policy and whether the employee is classified as a "regular" employee versus a temporary or seasonal worker.

Employer Policies and Accrual Rules

Most California employers have a written vacation policy that outlines how accrual works during any type of leave, including WC. Common approaches are:

• Continue accrual at the regular rate.
• Pause accrual for the duration of the WC claim.
• Accrue at a reduced rate based on reduced work hours.

If the policy is silent on WC, the default is to treat the leave like any other paid or unpaid leave: the employee continues to accrue vacation as if they were working, unless the policy explicitly states otherwise.

Paid vs. Unpaid Workers' Compensation Benefits

California WC benefits are generally wage‑replacement benefits, not salary. They are paid by the employer's insurance carrier, not the employer directly. Because the benefits are not "wages" from the employer, some companies choose to suspend vacation accrual during the claim. Yet, because vacation is earned based on time worked, many employers maintain accrual to avoid violating the Labor Code's "earned wages" protection.

Practical Steps for Employees

1. Review your employee handbook or written vacation policy.2. Ask HR for a written clarification on how WC leave affects accrual.3. Keep records of WC claim dates and any communications about vacation.4. If the employer's policy seems contrary to the Labor Code, consider consulting the California Labor Commissioner's Office.

Table: Typical Employer Approaches to Vacation Accrual During WC