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McPherson v. EF Intercultural Foundation, Inc.

Court of Appeal of California, Second Appellate District, Division Three

April 1, 2020, Opinion Filed





When an employer's policy allows an employee to take an unspecified amount of paid time off without accruing vacation time, does the employee's right to that paid time off vest so the employer must pay her for unused vacation under Labor Code section 227.32 when her employment ends? Or does section 227.3 apply only to policies providing a fixed amount of vacation that accrues over time? That is the primary issue posed by this appeal by EF Intercultural Foundation, Inc. (EF) from the trial court's judgment awarding vacation wages to three of EF's former exempt employees—Teresa McPherson, [*2]  Donna Heimann, and Linda Brenden.

In the published portion of this opinion, we conclude section 227.3 applies to EF's purported “unlimited” paid time off policy based on the particular facts of this case. We by no means hold that all unlimited paid time off policies give rise to an obligation to pay “unused” vacation when an employee leaves. Flexible work arrangements and unlimited paid vacation policies may be of considerable benefit to employees and to the employers who want to recruit and retain those employees. Employees and employers are free to contract for unlimited paid vacation, consistent with the Labor Code and governing case law. Here, however, EF never told McPherson and her fellow plaintiffs that they had unlimited paid vacation. EF had no written policy or agreement to that effect, nor did its employee handbook cover these plaintiffs. As it turned out, McPherson, Heimann, and Brenden took less vacation than many of EF's other managers and exempt employees covered by the employee handbook, whose accrued vacation vested as they worked for EF month after month.

As to Heimann only, we reverse the judgment and remand the case to the trial court to recalculate the amount of vacation wages [*3]  owed her, excluding vacation wages earned after she moved to Virginia in 2005.3 We affirm the judgment in all other respects, addressing EF's additional contentions in the unpublished portions of the opinion.

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2020 Cal. App. LEXIS 267 *

TERESA McPHERSON et al., Plaintiffs and Respondents, v. EF INTERCULTURAL FOUNDATION, INC., Defendant and Appellant.


Prior History:  [*1] APPEAL from a judgment of the Superior Court of Los Angeles County, No. BC609090, Michael J. Raphael, Judge.

Disposition: Affirmed in part and reversed in part with directions.


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Civil Procedure, Trials, Bench Trials, Appeals, Standards of Review, De Novo Review, Substantial Evidence, Sufficiency of Evidence, Standards of Review, Governments, Legislation, Interpretation, Business & Corporate Compliance, Labor & Employment Law, Wage & Hour Laws, Statutory Application, Scope & Definitions, Holiday, Sick & Vacation Pay