California lawmakers continue to tweak the state’s employment laws, and the latest change comes in the form of Assembly Bill 2123 (AB 2123). This amendment to the Paid Family Leave (PFL) program removes a long-standing provision that allowed employers to require employees to use vacation time before accessing PFL benefits. While this may seem like a minor adjustment, it can have real consequences for small businesses already struggling to balance staffing and cash flow.
The Key Change: No More Mandatory Vacation Use
Previously, California employers had the option to require employees to use up to two weeks of earned but unused vacation before collecting PFL benefits. This allowed businesses to manage workloads more predictably and reduce the financial impact of extended absences.
AB 2123 eliminates that option for any disability starting on or after January 1, 2025. Employees will now be able to access PFL benefits immediately, without first tapping into their vacation balance. Employers will need to revise their policies to reflect this change and prepare for potential scheduling gaps when workers take leave.
What This Means for Employers
For small businesses, losing the ability to require vacation use means more unpredictability. Workers can now hold onto their paid time off while also receiving wage replacement through PFL, increasing the chances of extended absences. This makes workforce planning more difficult, especially for businesses with lean teams where every employee’s presence matters.
Employers should review their current policies and consider alternative strategies for managing absences. Cross-training employees, adjusting shift schedules, or updating leave policies to encourage voluntary vacation use before PFL could help minimize disruption. Since this law does not affect other forms of leave, businesses should also ensure their Family and Medical Leave Act (FMLA) and California Family Rights Act (CFRA) policies align with the updated rules.
Compliance Steps
To stay compliant, employers should:
- Update employee handbooks to remove any language requiring vacation use before PFL benefits.
- Communicate the changes to employees so they understand their rights and the company’s expectations.
- Assess financial and operational impact, especially for roles that are difficult to backfill.
- Train HR and management on how to handle PFL requests under the new law.
Employers with unionized workforces should also check if their collective bargaining agreements require renegotiation based on this change.
Final Thoughts
California’s employment laws evolve constantly, and business owners are often left scrambling to comply. For help reviewing and updating your company’s leave policies, Integrated General Counsel, P.C. provides strategic legal guidance tailored to California businesses. Call (925) 399-1529 to ensure your company is ready for the changes ahead.
