Whether it’s a restaurant paying minimum wage or a multi-facility healthcare organization with salaried employees, most companies have formal paid time off (PTO) policies. Regardless of whether you call it a vacation day, sick time, furlough, PTO, PDO, or something else, you need to know what laws govern PTO in the states where you operate. You should particularly be aware of any legal requirements regarding paying out banked PTO upon termination of employment.
Does your state require employers to pay out PTO?
Paying out your terminated employees’ accrued and unused vacation time isn’t subject to federal law, but it’s important to pay attention to states’ laws since regulation is under their purview. If your company has locations in multiple states, it’s critical to review all statutes regarding separation pay. This handy table provides the basic information you need to know but be sure to check each state’s departments of labor for specific guidelines. We’ll keep this chart updated with the latest state regulations on PTO payout in 2024 and beyond.
| State | Statutory Requirements Addressing Vacation Pay | Use-It-or-Lose-It Policy | Payment of Accrued Vacation on Separation | Employer Penalty for Failure to Pay |
| Alabama | None | No | Not specifically addressed by state law. However, if an employer has a formal vacation policy, it may not unilaterally rescind that policy. Employers must notify employees in advance if they decide to discontinue paying accrued, unused vacation upon separation. | None |
| Alaska | None | No, but vacation pay is considered a vested right. | Not specifically addressed by state law. But an employer’s policy or agreement determines whether earned, unused vacation is paid on separation. | An employer that does not pay final wages can be held liable for the employee’s final unpaid wages from the time the employee demanded them to the time of payment, or a continuation of wages for 90 days, whichever amount is less. |
| Arizona | None | No | State law requires that every employee must be paid “all wages due” when there is an employment separation, but this does not expressly refer to PTO. PTO payouts are covered under each employer’s policy and standards. | An employer that does not pay final wages can be sued by an employee for triple damages, or the employee can file a wage claim limited to $5,000 with the Industrial Commission. |
| Arkansas | For state employees only. | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. Upon termination, resignation, or retirement of state employees, amounts due (including accrued unpaid annual or holiday leave due) should be included in the final pay to the employee for active work. | A private employer that does not pay final wages within seven days of the next regular payday is liable to the employee for double the wages due. |
| California | Yes | Prohibited by state law. Employers may implement a practical accrual cap on vacation time. | Employees cannot be deprived of earned, unused vacation time, no matter the reason for separation, unless both parties have an agreement stating otherwise. | An employer that does not pay final wages is liable for the final wages plus up to 30 days of wages payable at the employee’s regular rate. An employer that willfully does not pay final wages must also pay restitution to the employee. |
| Colorado | Yes | Permissible with regard to vacation agreements if the policy is included in an employment contract or employee handbook. | Upon employment separation, all vacation pay must be accurately paid and delivered to the appropriate parties. | After receiving an employee’s written demand, an employer that does not pay within 14 days is liable for double the amount of the unpaid final wages, or up to 10 days’ worth of the employee’s average daily wages (which accrue starting from the date the employer receives the written demand), whichever amount is greater. The penalty increases by 50% if the failure to pay is willful. An employer that does not answer a DOL complaint for unpaid wages (up to $7,500) will be issued a citation and a notice of assessment for the amount owed, plus penalties. |
| Connecticut | None | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | If the employer has a policy and does not pay, employees may recover 2 times the amount of the unpaid wages. Depending on the amount owed, an employer may also be liable for a fine of $200 to $5,000, and/or be imprisoned for three months to five years. |
| Delaware | None | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. If they do, the value of the accrued time must be paid within 30 days of separation. | Employers with a PTO policy must make any payouts within 30 days of a separation. An employer that does not pay final wages is liable for the unpaid wages, or damages equal to 10% of the unpaid wages per day until paid, whichever amount is less. |
| District of Columbia | Yes | No | Vacation pay may be seen as “wages” that might be due upon termination (DC CodeAnn, Secs. 32-1301 and 32-1303. An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that does not pay final wages is liable for damages equal to 10% of the unpaid wages per day until paid. |
| Florida | None | No | No | N/A |
| Georgia | None | No | No | N/A |
| Hawaii | None | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. If an employer has this policy, earned vacation must be paid on an employee’s last day. If there is no agreement in place, a company is not required to make payments on unused vacation time. | An employer that does not pay final wages to an employee is liable for the final pay, plus any pay owed at the employee’s regular rate for the three months prior to the closing of business. An employee can sue for unpaid final wages. The employer may be liable for fines ranging from $2,000 to $10,000 per offense, criminal fines of $100 to $10,000, and/or be subject to one year in jail for each violation. |
| Idaho | None | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that does not pay final wages is liable for up to 15 days’ unpaid wages, up to $750. The maximum penalty is $500 if final wages are paid before a lien is filed. |
| Illinois | Yes | Permitted by state law. In addition, employees must be educated about this policy, as well as have a fair opportunity to use vacation time. It is up to the employer to allow the carry-over of annual unused vacation time and decide how many days employees can carry over. | Unless a willful agreement has been met by both parties, an employer’s policy or agreement decides whether earned, unused vacation is paid on separation. | An employer that does not pay final wages is liable for the amount unpaid, plus damages equal to 2% of the unpaid amount. |
| Indiana | Yes | While not addressed by state law, Indiana courts have suggested these policies are permitted. | An employer’s policy or agreement determines whether earned, unused vacation is paid on separation. Without a policy in place, employees are entitled to any and all earned and unused vacation pay. | An employer that does not pay final wages may be liable for a penalty equal to 10% of the amount of unpaid wages due, per day, up to 2x the amount of the unpaid wages. |
| Iowa | None | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that does not pay final wages may be liable for a fine equal to $500 per failure, plus damages equal to 5% per day if the employer fails to pay within 7 days of the due date. |
| Kansas | None | Permitted by state law. | Employers may restrict the payment of accrued vacation if their policy, for example, states that: – Employees will only earn vacation time when passing their anniversary date. – Employees that separate prior to their anniversary dates will not be entitled to compensation. Employers are liable to provide the vacation pay established in their policy. | An employer that willfully does not pay final wages is liable, beginning on the eighth day the wages remain unpaid, for the amount unpaid, or the amount unpaid plus 1% of those wages per day, whichever is less. |
| Kentucky | None | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that does not pay final wages may be assessed a civil penalty ranging from $100 to $1,000 per offense. Each failure to pay final wages is a separate offense. |
| Louisiana | Yes | Permitted by state law. | Employers are required to pay employees any accrued, unused vacation time at separation. | In the event of a dispute over the amount of wages due, the employer must pay the undisputed portion and the employee has the right to file suit for the balance claimed. An employer that does not pay final wages may be liable for the full amount of the final wages due, or 90 days’ wages at the employee’s daily pay rate, whichever amount is less. The employee is also entitled to reasonable attorney fees. |
| Maine | Yes | No | Private employers who have 11 or more employees are required to pay those employees for any unused PTO. This state statute overrides any employer’s individual policies. | N/A |
| Maryland | Yes | No | Without a written policy in place highlighting the forfeiture of pay for accrued, unused vacation to a separating employee, the employee must be paid a cash value for earned, unused vacation. | An employer that does not pay final wages may be liable for fines ranging from $100 to $500. An employer also may be sued for unpaid wages. |
| Massachusetts | Yes | Permitted by state law. Employers may establish a cap on vacation accrual but are required to give employees a fair notice of the policy. Employers can implement an accrual cap. | Employers are liable to pay separating employees any earned, unused vacation time. | An employer that does not pay final wages may be guilty of a misdemeanor and liable for fines of up to $1,000. A court may award triple damages to an employee if the employer willfully held back wages. |
| Michigan | None | No | Employers are liable to pay fringe benefits if outlined in their written policy or contract. Employers cannot revoke or withhold any payments due at an employee’s separation. | An employer that does not pay final wages must pay restitution to the employee or a maximum civil penalty of $25,000 per violation. The maximum penalty is reduced to $7,000 if the employer has no prior violations. For a first offense, criminal fines of up to $25,000 may also apply and/or the employer may be imprisoned for up to one year. For a second offense, the criminal fine increases to $50,000 and the maximum jail term is 2 years. |
| Minnesota | Yes | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that does not pay final wages may be liable for civil penalties equal to 10% of the unpaid wages per year and damages equal to 2X the amount of unpaid wages. If the violation is flagrant or repeated, an added penalty of up to $1,000 may apply. Not paying final wages is also a misdemeanor, punishable by a fine and/or imprisonment. |
| Mississippi | None | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | N/A |
| Missouri | None | No | Final wages do not include vacation pay. | N/A |
| Montana | Yes | Prohibited by state law. However, policies that put a maximum cap on vacation time are permitted for employers. | If vacation has been promised in writing or verbally then it must be paid out on separation. | An employer that does not pay final wages may be guilty of a misdemeanor and a penalty equal to 110% of the owed wages. |
| Nebraska | Yes | Prohibited by state law. | Employers are liable to pay separating employees any earned, unused vacation time. | Employees may sue to recover unpaid final wages and court costs, including attorney fees equal to 25% of the unpaid wages. An employee may recover 2X the amount of unpaid final wages if the employer’s failure to pay is willful. |
| Nevada | None | No | Employers may restrict the payment of accrued, unused vacation pay at the time of separation. However, employers should maintain a consistent policy. | If an employer does not pay final wages to an employee who has been fired within three days after the wages are due, or to an employee who quits when the wages are due, the wages or compensation of the employee continue at the same rate from the day the employee was fired or quit until paid, or for 30 days, whichever is less. |
| New Hampshire | None | Permitted by state law. | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that willfully does not pay final wages may be liable for the wages due, or up to 10% of the unpaid wages for each day the final wages remain unpaid, whichever is less. |
| New Jersey | None | No | Earned, unused vacation will not be considered wages unless an employer’s policy, agreement or union contract states otherwise. | An employer that does not pay final wages may be liable for administrative fees ranging from 10% of the amount due for a first offense, to 25% of the amount due for subsequent offenses. Administrative penalties ranging from $250 for a first offense to $500 for subsequent offenses may also apply. |
| New Mexico | Yes | No | The New Mexico Supreme Court determined that accrued vacation was compensation of a fixed and definite amount in the same category as wages. | An employer that does not pay final wages may be sued by the employee and may be liable for up to 60 days’ unpaid wages and may be guilty of a petty misdemeanor, and/or fined up to $500 and imprisoned for up to six months for a first offense. Conviction for a subsequent offense is a misdemeanor punishable by a fine of up to $1,000 and/or imprisonment for up to one year. Each violation is a separate offense. |
| New York | Yes | Permitted by state law. Employers must provide an advance notice of the policy. | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that does not pay final wages may be liable for a $500 civil fine per violation. Criminal penalties may also apply. For the first offense, an employer may be guilty of a misdemeanor, with fines ranging from $500 to $20,000 and/or imprisonment for up to one year; for a second offense within six years, the employer may be guilty of a felony, with fines ranging from $500 to $20,000 and/or imprisonment for up to one year and one day. |
| North Carolina | Yes | Permitted by state law. Employers must post notices in writing of any policy that requires or results in the loss of vacation time. | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that does not pay final wages may be liable for the unpaid wages, liquidated damages equal to the amount of unpaid final wages, interest, and court costs. |
| North Dakota | Yes | Permitted by state law. Requires a notice of the policy and reasonable opportunity for employees to use the vacation time. | Employers are liable to pay a separating employee for earned, unused vacation time before separation. Private employers may revoke payment for accrued vacation time if: The employer gave the employee written notice at the time of hiring about this policy. The employee has been employed for less than one year. The employee gave fewer than five days’ notice before separation. | An employer that does not pay final wages is liable for the final wages, plus up to 30 days’ wages payable at the employee’s regular rate of pay, plus interest. An employer may be liable for 2X the amount of unpaid final wages if it was liable for 2 previous wage claims within one year before the due date, and 3X the amount owed if it had three or more previous wage claims. |
| Ohio | Yes | While not addressed by state law, Ohio courts have suggested these policies are permitted | The courts have interpreted that vacation pay is a deferred payment of an earned benefit, and unless an employer’s vacation policy states to the contrary, an employee is entitled to be paid for unused vacation days. | An employer that does not pay final wages within 30 days, or within 60 days of an uncontested court filing or judgment, may be liable for the unpaid wages plus 6% of the amount due or $200 |
| Oklahoma | None | Permitted by state law. | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that does not pay final wages may be liable for damages equal to 2% of the unpaid wages per day, or the amount of the unpaid final wages, whichever is less. |
| Oregon | None | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that does not pay final wages is liable for the amount of final wages due, plus up to 30 days’ wages payable at the employee’s usual rate of pay, calculated at eight hours a day. Penalties will not be assessed if the employer pays all final wages within five days after the employee submitted a timecard. An employer will not be liable for failing to pay final wages if it pays 100% of the amount due within 12 days after receiving notice from the employee. |
| Pennsylvania | None | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that does not pay final wages more than 30 days after the regularly scheduled payday may be liable for damages equal to 25% of the unpaid wages, or $500, whichever amount is greater. An employer that does not pay final wages or satisfactorily explain its failure to the Pennsylvania Secretary of Labor within 10 days may be liable for a penalty equal to 10% of the amount due. |
| Rhode Island | Yes | No | Employers are liable to pay separated employees accrued vacation pay if they have served one year, or more, at their organization. | An employer that does not pay final wages is liable for the unpaid wages and may also be liable for damages equal to 2X the amount owed. An employer that does not pay wages may be guilty of a misdemeanor and fined up to $400, and/or imprisoned for 10 to 90 days. An employer that pays an employee’s unpaid final wages to the Department of Labor and Training may be required to pay an administrative fee of 25% of the amount due for the first offense, and 50% of the amount due for subsequent offenses. |
| South Carolina | None | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that violates termination pay requirements is subject to a civil penalty of not more than $100 for each violation. Each failure to pay is a separate offense. In addition, an employee who was not paid as required may recover in a civil action 3X the full amount of any unpaid wages, plus costs and reasonable attorneys’ fees. Civil actions for the recovery of wages must be started within three years after the wages become due. |
| South Dakota | None | No | No state regulations in place. | NA |
| Tennessee | None | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that does not pay final wages may be guilty of a misdemeanor and liable for fines ranging from $100 to $500. An employer that commits at least 2 offenses may be liable for a civil penalty ranging from $500 to $1,000 per offense. |
| Texas | None | Yes | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | None |
| Utah | None | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. If employers do not pay for accrued days upon separation, this must be stated explicitly in the contract or policy. | An employer that does not pay final wages more than 24 hours after a fired employee’s demand is liable for the final wages, plus up to 60 days’ wages payable at the employee’s usual rate of pay. The employee must sue to recover the final pay. |
| Vermont | None | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that does not pay final wages may be liable for a $5,000 fine. Corporate officers may be personally liable for unpaid final wages. An employee may sue an employer for 2X the amount of unpaid final wages, plus costs and reasonable attorney fees. |
| Virginia | None | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that does not pay final wages will be liable for the unpaid wages, plus 8% interest calculated from the date final wages were required to be paid. An employer that knowingly does not pay final wages may be liable for a $1,000 civil fine per offense. An employer that willfully and with intention to defraud does not pay up to $9,999 in final wages may be guilty of a misdemeanor; if the amount is $10,000 or more, the employer may be guilty of a felony. |
| Washington | None | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that does not pay final wages may be guilty of a misdemeanor. An employer may be ordered to pay final wages plus interest at 1% per month, calculated from the date final wages became payable. An employer that does not pay final wages within 30 days of receiving a notice to pay from the DOLI may be liable for the unpaid wages, plus 10% of the amount due. An employer that willfully does not pay final wages may be liable for a civil penalty equal to $1,000, or 10% of the amount due, whichever is greater, up to $20,000. |
| West Virginia | Yes | No | If an employer has a written policy stating that accrued vacation time will not be paid at separation, they will not be liable to pay an employee. | An employer that does not pay final wages on time may be liable for 2X the amount of the unpaid wages as damages, plus the amount that was not paid when due. |
| Wisconsin | None | No | Employers are not required to pay employees upon separation. | An employer that does not pay final wages may be liable for a $500 fine and/or imprisoned for up to 90 days for each offense; the employer may also be liable for the unpaid final wages and up to 100% of the amount required to be paid, depending on when payment is made. |
| Wyoming | Yes | No | An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. | An employer that willfully does not pay final wages is guilty of a misdemeanor and liable for a fine ranging from $500 to $750 per offense. In addition to final wages owed, an employee is entitled to 18% interest calculated from the separation date. |
Which states require PTO payout?
- California
- Colorado
- Illinois
- Indiana
- Louisiana
- Maine
- Maryland
- Massachusetts
- Minnesota
- Montana
- Nebraska
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Rhode Island
- West Virginia
- Wyoming
Do Companies Have to Pay Out PTO?
This answer is entirely dependent on state law and company policy. Companies that have facilities where there is a state law or who have an internal policy to pay PTO upon termination and do not can be heavily fined.
Is PTO Required by Law?
No, paid time off is not required by federal or state law; however, most businesses have a PTO policy to attract and retain good employees.
Does My Company Have to Pay Me for Unused Vacation Time?
If you are employed, your employer may allow you to carry over unused vacation time to the following year, but they do not have to pay you for unused time. Companies that are located in states with laws governing PTO payout or that have their own corporate guidelines in place to pay PTO upon termination must do so or face fines.
Which States Prohibit Use-It-or-Lose-It Vacation Policies?
California, Colorado, Montana, and Nebraska are the states that prohibit employers from implementing a use-it-or-lose-it policy.
Am I Entitled to My Vacation Pay if I Get Laid Off?
As with other terminations, this answer is entirely dependent on state law and company policy. If companies do not follow state law or their own published policy regarding PTO payouts, they could be heavily fined.
Paycor Can Help
Paycor Time makes labor management both time and cost-effective. With our flexible mobile application, employees can request time off, see how much PTO they’ve accrued, and easily access employer PTO policies. But that’s just the tip of the iceberg. Employees can also clock in and out, manage their schedules, and view pay stubs, all while on the go. Want to learn more?
Paycor is not a legal, tax, benefit, accounting or investment advisor. All communication from Paycor should be confirmed by your company’s legal, tax, benefit, accounting or investment advisor before making any decisions.