An employer is entitled to adopt a policy specifying "the amount of vacation pay an employee is entitled to be paid as wages," depending on length of service. (Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, 783 [183 Cal.Rptr. 846, 647 P.2d 122] (Suastez).) The law permits an employer to offer new employees no vacation time: If an express written company policy forewarns new employees that their compensation package does not include paid vacation during their initial employment, then no vacation pay is earned and none is vested. When such a policy is in place,
Appellant Lisa Owen began working as a sales associate at a Robinsons-May department store (Robinsons) in 1990. In August 2005, Robinsons was acquired by respondent Macy's, Inc. In January 2006, employees at the Robinsons in Arcadia where Owen worked were notified that the store would be permanently closed—and their jobs eliminated—by April 2006. Owen filled out a "career interest form" indicating that she was not interested in job placement at a Macy's department store. The Arcadia Robinsons closed on March 18, 2006. After the closure, Owen "was doing stuff" around the store, though there were other people "that didn't do anything and sat around all day." Owen's employment at Robinsons ended on April 14, 2006. Her separation summary shows that she was not credited with any unused vacation pay, but received $12,469 in severance and other pay, based on her years of service.
In July 2006, Owen filed suit alleging that Robinsons failed to pay her accrued, vested vacation compensation, in violation of the Labor Code. Owen also alleged that Robinsons's conduct was an unlawful business practice, in violation of the Business and Professions Code. In an amended pleading, she added a claim for breach of the implied covenant of good faith and fair dealing. The lawsuit is styled as a class action on behalf of all similarly situated Robinsons employees.
The Robinsons employee handbook provides that "All eligible associates earn and vest in paid vacation
Thus, Robinsons imposes a six-month waiting period before new employees begin to earn vacation.
The Robinsons handbook states that "Beginning each May 1, you accrue and vest in up to 50% of your annual vacation amount and on August 1, you accrue and vest in up to [the remaining] 50% of your annual vacation amount." According to a former Robinsons executive, this last provision means that employees' annual vacation vested before it was actually earned. The executive testified that in some companies, employees earn vacation as each month passes. At Robinsons, the company assumed that the employee would remain employed the entire year. Proceeding "on good faith," Robinsons gave the employee an entire year's vacation by August 1, "even though you hadn't worked through that new vacation year yet." Thus, the entire vacation vests prior to an employee's earning his or her full entitlement. However, employees who leave on or before April 30 of any given year would not receive the first half of their vacation entitlement for the vacation year beginning May 1.
Owen testified that she took all three weeks of the vacation time to which she was entitled during the vacation years running from May 1 to April 30 in 2002-2003; 2003-2004; 2004-2005; and 2005-2006. Inconsistently, her declaration states, "I ... took none of the vacation time or pay I earned by working between May 1, 2005 and my termination date of April 14, 2006." Owen claims that she is entitled to four weeks of vacation pay for the vacation period running from May 1, 2006, to April 30, 2007 (i.e., after her job ended).
Owen was asked in a deposition, "And why did you conclude in your mind that you were entitled to four weeks for this May 1, 2006, to April 30, 2007, vacation?" She replied, "I don't know how—I don't know why." When pressed, she said, "I just felt we were entitled to it," adding, "Why wouldn't they just keep us for another two weeks to get our vacation pay?" Some Robinsons employees in the corporate office were fortunate enough to remain on the company payroll until May 1, 2006, and received vacation pay for the vacation year starting on May 1, 2006.
Robinsons brought a motion for summary judgment, arguing that Owen's claims fail as a matter of law because she was not denied any accrued
THE TRIAL COURT'S RULING
In its ruling, the trial court acknowledged the parties' polar positions: Robinsons believes that under its policy, vacation vests before it is earned, while Owen believes that vacation vests after it is earned. The court acknowledged that state law prohibits a "use it or lose it" policy with respect to vacation pay: if an employer offers vacation benefits, it is required to pay for all vested vacation upon termination of employment. The court rejected Owen's contention that an employer must offer vacation benefits from the first day of employment because state law does not "dictate the point at which a company providing vacation benefits must begin to provide them." The employer "is free to determine when an employee becomes eligible for vacation benefits so long as eligibility and vesting occur simultaneously." Thus, a "waiting period" for vacation benefits to accrue and vest is permissible.
The court granted Robinsons's motion for summary judgment. Judgment was entered in favor of Robinsons. A timely appeal was taken from the judgment.
1. Appeal and Review
The judgment for respondent is final and appealable. (Code Civ. Proc., § 437c, subd. (m)(1).) A motion for summary judgment "shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Id., subd. (c).) "The purpose of the law of summary judgment is to provide courts with a mechanism to cut through the parties' pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843 [107 Cal.Rptr.2d 841, 24 P.3d 493].) Review is de novo. (Kahn v. East
2. Overview of Labor Code Section 227.3
Owen's case is predicated on a violation of Labor Code section 227.3. The statute provides: "Unless otherwise provided by a collective-bargaining agreement, whenever a contract of employment or employer policy provides for paid vacations, and an employee is terminated without having taken off his vested vacation time, all vested vacation shall be paid to him as wages at his final rate in accordance with such contract of employment or employer policy respecting eligibility or time served; provided, however, that an employment contract or employer policy shall not provide for forfeiture of vested vacation time upon termination. The Labor Commissioner or a designated representative, in the resolution of any dispute with regard to vested vacation time, shall apply the principles of equity and fairness."
Moving to the language of Labor Code section 227.3, the court interpreted the statutory mandate that "`all vested vacation time shall be paid [to the employee] as wages at his final rate in accordance with such contract of employment or employer policy respecting eligibility or time served ....'" (Suastez, supra, 31 Cal.3d at p. 782, quoting § 227.3.) The court explained that the quoted "passage only means that the amount of vacation pay an employee is entitled to be paid as wages is to be determined with reference to the employer's policy. The typical vacation policy provides that the amount of vacation time for which an employee is eligible depends on, among other things, the length of employment with the company and the title or position the employee holds. The Legislature has left the determination of these variables to the employer or the bargaining table. If the Legislature had intended the contract to control the time of vesting, it could easily have drafted the statute to compel such a result. It did not." (Suastez, at p. 783.) The primary rule to be extracted from Suastez is that vacation pay vests as it is earned, under Labor Code section 227.3.
3. An Employer May Refuse to Offer Paid Vacation to New Employees
At the heart of Owen's objections is Robinsons's policy declaring that a new employee earns no vacation time during the first six months of employment. Employees who have worked for Robinsons for six months to one year earn and vest in vacation time on a prorated basis. In Owen's view, Suastez requires that an employee be credited with vacation time starting from the very first day of employment. As a result, Owen reasons, Robinsons's initial six-month waiting period—during which an employee earns zero vacation credit—is unlawful.
Owen agrees that under Suastez, the amount of vacation pay that an employee is entitled to be paid as wages is established by company policy. (Suastez, supra, 31 Cal.3d at p. 783.) In Suastez, the employer's written vacation policy was "1 week—First Year," followed by "2 weeks—Second Year," and so on. (Id. at p. 776, fn. 2.) The implication to be derived from the employer's policy in Suastez is that the employee began earning a fraction of one week's vacation pay from the very first day of work, until a full week of vacation accrued at the end of the employee's first year. Although vacation time was fractionally earned on a daily basis starting from day one in Suastez, none of it vested until the end of the employee's first year, under the employer's policy.
The Robinsons vacation policy is distinguishable from the policy described in Suastez. Unlike the policy in Suastez, which unequivocally provided that an employee would earn a one-week vacation during the "first year" of employment (i.e., starting on day one of the employment), it is clear from the Robinsons employee handbook that the amount of vacation time earned during the first six months of employment is zero. After the first six months, the employee earns, accrues and vests in a small amount of vacation time. Thus, Robinsons's policy excludes vacation benefits at first, followed by a small amount of vacation pay earned after the initial six-month period; it is not a "1 week—First Year" policy, as in Suastez.
By way of analogy, the courts have approved employer vacation policies that warn employees, in advance, that they will cease to accrue vacation time accumulated in excess of an announced limit. "[I]f the employment agreement precludes an employee from accruing more vacation time after accumulating a specified amount of unused vacation time (a `no additional accrual' policy), the employee does not forfeit vested vacation pay. A `no additional
If an employer's written vacation policy may legitimately prevent an employee from earning additional vacation compensation well into the course of the employee's career, when the employee has "maxed out" on unused vacation time—without causing an illegal forfeiture of vested vacation—then the opposite is equally true. The employer's written vacation policy may legitimately prevent a new employee from earning any vacation time at all, just as the policy may deny long-term employees any further vacation time. In effect, these written policies forewarn employees that if they begin a career at these companies, (1) they will not earn any vacation time during the first six months, and they will not vest in or forfeit any vacation compensation if they leave during that initial period, but they will earn and vest in vacation time after six months and (2) if they choose to continue their career at these companies, they will earn vacation up to a certain maximum amount, but if they continue to work after reaching this maximum, they will not be compensated for or vest in additional vacation time.
4. Owen Did Not Earn Vacation in Advance of the Vacation Year
In Owen's view, she earned her vacation in advance of the "vacation year" beginning on May 1, because Robinsons improperly failed to credit her and other employees with vacation time starting from their very first day on the job. As a result, she reasons, an employee who leaves on April 29 forfeits vacation compensation that was earned during the preceding year. Owen's view is mistaken.
As discussed above, Robinsons's written policy legitimately prohibited new employees from earning any amount of vacation for the first six months. After the first six months, employees earn a small amount of prorated vacation, until May 1 arrived. At that point, a junior associate would accrue 50 percent of a one-week annual vacation, and the other 50 percent would accrue on August 1. The only event that occurred "in advance" was the rate at which vacation accrued. Instead of having to wait for the weeklong vacation to slowly accrue while being earned by the employee between May 1 and April 30, the employee could promptly take the entire vacation in August. If the employee quit in September, after taking the full vacation, the employee would take advantage of Robinsons, by using up vacation time that had not yet been earned.
During her deposition, Owen acknowledged that she took all three weeks of the vacation time to which she was entitled between May 1, 2005, and April 30, 2006. She had difficulty expressing why she felt entitled to four weeks of vacation for the vacation year starting May 1, 2006, when her employment ended on April 14, 2006. Finally, she asked, "Why wouldn't they just keep us for another two weeks to get our vacation pay?" In effect, Owen wants to be paid for a vacation year (May 1, 2006-April 30, 2007) during which she did not work for Robinsons or earn any vacation time. Owen was given substantial separation pay. She is not entitled to vacation pay for a year in which she did not work for her employer.
The judgment is affirmed. Each side to bear its own costs on appeal.
Doi Todd, J., and Chavez, J., concurred.