Lesson Last Updated: October 14, 2024

What’s Changed?

This update should be fairly short! In this lesson, we'll cover a 2025 change to family leave that will affect any employer that offers vacation or other similar PTO. Suggested next steps are highlighted in yellow. 

Prior to January 1, 2025, existing California law stated the following: “As a condition of an employee’s initial receipt of family temporary disability insurance benefits…an employer may require an employee to take up to two weeks of earned but unused vacation leave prior to the employee’s initial receipt of these benefits.” [1]

The plain English of this is that previously, employers could require employees to use up to two weeks of accrued vacation before the employee could be eligible for paid family leave (“PFL”) insurance benefits paid by the state through the EDD (or their employer, if the company has an approved voluntary plan that applies in lieu of the state program; most small employers do not have this in place). 

However, as of January 1, 2025, employers cannot require that their employees use their vacation prior to receiving PFL. Employees may choose to use their vacation during PFL, but it can no longer be employer mandated.

The idea behind this change is that it (somehow) makes PFL more accessible to employees. However, employers will likely bristle at this change, because it means that an employee that may have taken a prolonged leave of absence can come back to work and request to use vacation. But take heart! There may be a silver lining here for employers after all. 

During California Family Rights Act (“CFRA”) leave, employers are required to maintain the same level of employee benefits for employees on leave, which includes healthcare and retirement plan contributions. The challenging aspect of this when an employee takes leave is how to collect any applicable employee contributions, because if they’re not receiving any wages from the employer, the employer cannot make a payroll deduction! Typically, an employer will arrange for the employee to mail their own contribution, either to the employer or the benefit provider directly, but sometimes things fall through the cracks with that method. Here’s where our silver lining comes in. 

If an employer does not require an employee to use their vacation in advance of receiving PFL, the employee can instead opt to supplement PFL with their vacation in order to receive 100% of their pre-leave pay. If you haven’t already read our “Understanding Family and Medical Leave in California” lesson, now would be a great time to do that! Back to this update though: if an employee chooses to supplement their PFL with their accrued vacation, that means that they will receive a check from their employer, which means the employer can then collect employee contributions directly through withholdings. 

Even if this silver lining doesn’t apply to your workplace (based on the benefits you offer), you don’t automatically have to grant vacation to anyone who asks for it. So if your employee returns from leave and immediately requests vacation, speak to your attorney about how to navigate that situation, but know that you have options.

Before we move on to the next lesson, note that if you’re a San Francisco employer of 20+ employees worldwide, this legal change also creates a silver lining specifically for you. For the uninitiated, San Francisco’s Paid Parental Leave Ordinance (“PPLO”) requires supplemental pay for eligible employees when they receive California PFL benefits, but PPLO does allow employers to apply accrued vacation time to meet the employer’s obligations under the ordinance. This means that, although an employer cannot require that vacation be used for state law purposes, it can be used under this local ordinance! Before 2025, had an employer required an employee to use vacation before they received PFL benefits, the employer would have to shell out additional cash to supplement the PFL wages, meaning that this change may actually save San Francisco employer’s money in the long run!

San Francisco employer or not, it’s time to revise your employee handbook to ensure that it does not reflect any requirement to use vacation time before taking PFL. 

This Lesson's Sources:

[1] Assembly Bill No. 2123

[2] San Francisco Paid Parental Leave Ordinance