Statute of Limitations for Vacation Claims

In California, by statute, all accrued, unused, vacation must be paid at the time of termination of employment. Long-term employees may have been accruing vacation for years. What happens when an employer fails to pay out vacation that accrued long ago? Does the statute of limitations bar recovery? The state Division of Labor Standards Enforcement and a court opinion previously answered that question, "yes." But in Church v. Jamison, a different Court of Appeal decided that the statute of limitations for unpaid vacation does not accrue until the termination date, and that all unused vacation pay earned may be the subject of a timely lawsuit.

The court also decided that claims for unpaid wages were subject to the statute of limitations for oral contracts (two years), rather than the three-year statute applicable to statutory claims. This holding likely will not apply to overtime claims, because overtime is a creature of statute. The obligation to pay (base) wages, on the other hand, arises from the "contract" to perform services in exchange for pay.

Finally, the court held that business expense reimbursement claims under Labor Code section 2802 arise as the employee incurs the expense, and that a three-year statute of limitations applies. This means that employees who do not submit expenses for reimbursement within three years of incurring them would be barred from recovery, even if the employees have not yet been terminated. Some of you know people who might wait three years to turn in an expense report.

DGV