There is no federal law requiring employers to pay out accrued, unused vacation or PTO when you leave — the Fair Labor Standards Act doesn't even require paid vacation. Whether you're owed a payout is entirely a state-law question, and it turns on one thing: does your state treat earned vacation as wages? Where it does, accrued vacation generally can't be forfeited and must be paid at separation. Where it doesn't, your employer's written policy or contract controls.
States where accrued vacation must generally be paid out
These states treat earned vacation as wages (statute, agency guidance or case law), so it's typically owed when you leave:
| State | Basis |
|---|---|
| California | Labor Code §227.3 — vacation vests as earned; forfeiture / "use-it-or-lose-it" is illegal; all vested vacation paid at your final rate |
| Illinois | Wage Payment & Collection Act (820 ILCS 115/5) — monetary equivalent of earned vacation paid as final compensation |
| Massachusetts | Massachusetts Wage Act — vacation is "wages"; paid on the day of discharge if fired |
| Louisiana | La. R.S. 23:631 / 23:634 — if the employer has a vacation policy, accrued unused vacation must be paid; forfeiture of amounts due is prohibited |
| Colorado | Colorado Wage Act + Nieto v. Clark's Market (2021) — earned vacation is wages; forfeiture is void |
| Nebraska, North Dakota, Rhode Island, Maine, Indiana | Also generally require payout of earned vacation (some with conditions — e.g. Maine applies to employers with >10 employees; Rhode Island after ~1 year). Verify with the state labor department before relying on it. |
States where "use-it-or-lose-it" / no payout is generally allowed
In most states — including Texas, New York, Florida, Georgia, Ohio, Pennsylvania, Arizona and many others — there is no statute forcing payout. Whatever your employer's written policy or contract says controls: if it promises a payout, that promise is enforceable; if it lawfully forfeits or caps unused time, that generally applies.
The nuance that trips everyone up
"Use-it-or-lose-it" is used two different ways, and they're not the same:
- Forfeiting already-earned vacation at termination — illegal in states like California and Colorado.
- Capping accrual or expiring unused time during employment, if clearly communicated in advance — this is allowed in several "must pay out" states (e.g. Illinois and Massachusetts permit reasonable accrual caps, and California allows caps but not outright forfeiture).
That's why a single state can appear on both lists — both statements are true depending on which mechanism you mean.
What you're legally owed — the honest answer
Official sources
Federal position (no requirement): U.S. Department of Labor. California payout rule: California DLSE.
If you're in a state that treats vacation as wages, your accrued unused balance is owed in your final pay. If you're not, check your employee handbook / offer letter — a written payout promise is enforceable. When in doubt, contact your state labor department. This is general guidance, not legal advice, and laws change — confirm before acting.