A New Year’s Refresher on Floating Holidays

As business leaders are updating their handbooks for 2025 and reviewing employee benefits, CEA has received a number of questions about floating holiday policies and personal days. While many employers provide this type of benefit, they are not always aware of the strings attached to them. If not handled properly, floating holidays may be treated like vested vacation, in which case, unused days must be paid out on termination of employment and you must follow California’s vacations rules for carryover and capping this paid time off.

Are Employers Required to Provide Floating Holidays?

No. California law does not require employers to provide paid holidays or paid floating holidays. Some employers choose to observe paid holidays, such as New Year’s Day, Christmas or Thanksgiving, and to give employees additional floating paid days off. Often the goal is to allow employees to choose a paid day off to celebrate their birthday or anniversary with the company, or another holiday the company doesn’t already observe, such as Veterans Day.

My Employee Quit in June. Do I Have to Pay Them for Company-Observed Holidays That Will Occur Later in the Year?

No. Unlike many floating holidays, paid Company-observed holidays (where an employee receives paid time off on a specified day, such as Thanksgiving, New Year’s or Christmas) that will occur later do not have to be paid at termination.

My Employee Quit in June Without Using Their Two Floating Holidays. Do I Have to Pay Them for These Days?

Maybe. The answer depends on your floating holiday policy and practices. According to the California Labor Commissioner, paid leave time provided without condition is presumed to be vacation no matter what name it is given by the employer.

Holidays that are tied to a certain event, such as the employee’s birthday or anniversary, that are required to be used in the same workweek as the event, for example, will likely not be considered floating. Because the time is provided with condition—to be used near the time of the employee’s birthday or anniversary—rather than used at any time, it will likely not be required to be paid out at termination. On the other hand, a holiday that is not tied to a certain event will be treated as vacation and unused days must be paid out on termination of employment.

Best Practices

Review your floating holiday policy, if you have one. A floating holiday that can be used at any time and for any reason the employee chooses will be treated like vacation. If you offer paid time off for birthdays, work anniversaries, etc., make sure your policy requires employees to use this time in the same workweek as the event. Otherwise, you risk that the personal holiday will be treated just like vacation time, and will be subject to payout at termination.

Drafting policies can be challenging! Consider purchasing a DIY Sample Employee Handbook or working with one of  our experienced HR Advisors to quickly create a customized and compliant California Employee Handbook.