Northern California Record

Wednesday, January 22, 2020

Court gives California employers a break – but not a full vacation – from PTO reporting requirements

By Christopher Knoll | Dec 2, 2016

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SANTA ANA, California – California employers looking for clarification on whether they are required to report accrued vacation or paid time off (PTO) on each wage statement for every employee have received a decision that takes some careful reading to understand.

On Oct. 26, the California Fourth District Court of Appeal backed the ruling of a lower court, which stated that there was no statutory requirement that accumulated vacation time or PTO be itemized on wage statements because they are either gross wages or net wages earned.

The 2015 case (Soto v. Motel 6 Operating L.P.) involved an employee of Motel 6 who sued her employer for failing to provide wage statements that included accrued vacation and PTO, in violation of the California Labor Code regarding the reporting of gross or net wages.

The court, however, said that vacation time was a deferred wage and only becomes a wage upon an employee’s separation from the employer.

Robert Odell, an attorney with Workplace Justice Advocates, PLC of California, told the Northern California Record that the California Labor Code § 226(a) “only requires employers to report ‘earned’ wages; this does not include accrued vacation and PTO, since they are deferred wages that only become payable when the employee is terminated. Further, the court gave additional support to this argument when explaining that it would be impractical for employers to report the monetary value of accrued PTO and vacation, since that can only be calculated at the time the employee is terminated (i.e. at their final rate of pay).”

In 2014, California politicians passed the Healthy Workplaces, Healthy Families Act. In one section of the voluminous act, it is stated that an employer must provide an employee written proof of the amount of paid sick leave available or paid time off leave in lieu of sick leave on every pay date with the employee’s payment of wages.

So, is there a conflict? According to Odell, no. “The court's ruling in Soto doesn't hold that employers don't have to report accrued PTO and vacation time at all, only that they won't violate California Labor Code § 226(a) if they fail to do so," he said.

The interaction of Soto with the Healthy Workplaces, Healthy Families Act, Odell explains, is not as complicated as it appears.

“So technically, employers don't have to report accrued PTO and vacation in the employees' wage statements, but they still have to report it in some form each time employees are paid.” Odell advised. “For practical purposes, I believe employers should simply continue to report the accrued PTO and vacation time in each wage statement since it will satisfy the Healthy Workplaces, Healthy Families Act and reduce confusion for both employers and their employees.”

The Northern California Record asked Odell what this case means for employees and their employers. “I feel that this ruling only helps employers to the extent that they will be able to avoid drawing lawsuits for this narrow issue (i.e. not reporting PTO and vacation in the wage statements),” Odell said, but warned that “I feel the court’s ruling disadvantages employees since they may need to look elsewhere in order to find out how much sick time they have available. Depending on the employer’s method for reporting accrued sick time (if they choose to do it outside the wage statement), it may be difficult for employees to locate and will likely discourage them from using their earned sick time when they truly need to do so.”

What would be ideal, Odell offered, would be a single all-encompassing requirement concerning the reporting of accrued vacation time and PTO. Until that day, this is the best that Californians are expected to work with.

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