Firm News & Events

School-Related Leaves as Summer Ends

by Alyssa C. Matsuhara

July 31, 2026

Question: With August approaching, many of my employees have children who go back to school soon.  What are my legal obligations as an employer if an employee wants to take time off to go to a school-related activity for their child?

Answer: Employer obligations with respect to school-related leaves depend on the size of the company and the reason for the employee’s request.

In California, employers who employ 25 or more employees at the same location must allow eligible employees to take up to 40 hours of unpaid leave each year to participate in certain school or child care activities.

An employee is eligible for school or child-care activities if he or she is a parent, guardian, stepparent, foster parent, grandparent, or person who stands in place of a parent, to a child or children of kindergarten age or grades 1 to 12.  If both parents are employed by the same employer at the same location, only the parent who first gave notice to the employer is entitled to take leave, but the other parent may also take leave with the employer’s approval.

Covered Activities

School-related activities include finding, enrolling, or reenrolling the child in a school or with a licensed child care provider or participating in activities of the school or licensed child care provider.  An employee may also take leave to address a child care provider or school emergency.  An “emergency” means that the employee’s child cannot remain in a school or with a child care provider due to any of the following: the school or child care provider has requested that the child be picked up or has an attendance policy that prohibits the child from attending or requires that the child be picked up; behavioral or discipline problems; unexpected closure or unavailability of the school or child care provider; or a natural disaster such as a fire, earthquake, or flood.

Notice Required

For planned absences, such as participating in school activities, employees must provide the employer with reasonable notice prior to the absence.  Time off for planned absences must not exceed eight hours in any calendar month.

For absences related to a school emergency, employees must give notice as soon as possible, and the eight-hour limit for planned absences does not apply to school emergency situations.

Employees, if requested by the employer, must provide documentation from the school or child care provider as proof that the employee engaged in child-related activities.  The documentation should be whatever written verification the school or child care provider deems appropriate and reasonable and must include the specific date and time of the activity.

Employees may use existing vacation, personal leave, or paid time off to participate in school-related leave unless otherwise provided by a collective bargaining agreement.  However, the employee may also use unpaid time off for these absences.

Other Leaves Related to Disciplinary Action

In addition to allowing leave for school-related activities and emergencies, all employers—regardless of size—may need to provide unpaid time off to employees who need to attend a child’s suspension or expulsion meeting or to comply with a school’s suspension or expulsion requirements.  Employees who take leave for these reasons must give their employer reasonable notice for the absence.  Time off for this leave can be paid or unpaid.

Employers should contact their labor counsel if they have questions about leaves of absence related to school activities and appearances.

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Reminders For Vacation Policies

by Fenton & Keller

July 17, 2026

Question: I started a new business and have many questions about vacation for employees.  Is this required?  Can I implement a “use it or lose it” policy?  Can I control and limit the employees’ vacation and policy structure?  Can I advance vacation hours to employees? Can employees share vacation?

Answer:

Vacation Benefits Are Not Required

In California, employers are not required to provide paid or unpaid vacation benefits. However, if an employer chooses to voluntarily offer these benefits, the employer must follow strict rules on how a vacation policy may be structured and implemented.  For example, employers cannot adopt “use it or lose it” policies, cannot impose an unreasonable “cap” on vacation accrual, and must pay out any accrued and unused vacation hours upon separation of employment.  These restrictions and some general information regarding vacation policies are summarized below.

“Use it or Lose it” Policy

The California Supreme Court in Suastez v. Plastic Dress–Up Co. (1982) 31 Cal.3d 774, held that vacation pay is a type of wage or deferred compensation for services performed that vests throughout the course of employment.  This means that accrued vacation hours are “wages” that cannot be forfeited if they are not used.  Accordingly, a policy that provides for the forfeiture of vacation pay that is not used by a specified date (“use it or lose it”) is an illegal policy under California law and will not be recognized by the Labor Commissioner.  However, as discussed below, the employer may reasonably limit and control the vacation policy’s structure and benefits before they vest.

Employer’s Right to Structure Vacation Policy and Control Before Benefit Vests

Although employers cannot require forfeiture of already vested vacation, employers still have broad discretion to control the mechanics of their vacation policies. Courts have recognized that employers may impose reasonable accrual caps, require waiting periods before vacation begins to accrue, and limit and control the vacation scheduling at a particular time and amount. For example, an employer may choose to implement a reasonable cap such as two times the annual accrual.  This prevents an employee from saving up and accruing an indefinite amount of vacation.  An employer may also choose to prevent employees from taking vacations during certain busy months.  Moreover, an employer may provide different vacation accruals to different categories of employees.  For example, an employer may provide more vacation to long-term employees and less vacation to newer employees or seasonal employees.  These are permissible and critical tools to help small businesses limit their vacation policy liability.

Advance on Unearned Vacation

Employers may choose to advance vacation hours to employees before it has been earned. However, this practice may create risk because vacation pay vests only as labor is performed.  If employment terminates before the employee earns sufficient vacation to offset the advance, recovering the unearned balance may conflict with California wage protections that prevent employers from deducting amounts from an employee’s final paycheck.  Employers who choose to implement a policy that allows a vacation advance should ensure that all aspects of the policy comply with applicable wage and hour laws.

Share Vacation to Others

California law does not expressly authorize the sharing or donating of vested vacation time. Because accrued vacation is treated as wages, any leave-sharing program must be carefully structured to avoid violating wage assignment restrictions and strict requirements for IRS special tax treatment. As a result, implementing vacation-sharing programs could create complex legal and compliance issues, including administrative burdens, privacy concerns, potential discrimination claims, and cash flow implications.

Employers who wish to provide vacation benefits to employees should contact their HR consultant or labor counsel to ensure the policy’s terms and implementation comply with these rules.

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Governor’s Executive Order on AI Workforce Disruption

by Emmanuel P. Jimenez

July 3, 2026

Question: I’m a small business owner and have used AI to do certain tasks I would previously have given to staff and make my business more efficient. I heard, however, that the Governor issued an order that limits how much employers can use AI to take over tasks that used to be performed by people. Is that true?

Answer: No. The Governor has not issued an order that restricts how employers can use AI in the workplace.  However, the Governor did issue an executive order recently that addresses how AI will, in the near future, disrupt the labor market.

On May 21, 2026, Governor Newsom issued a “first-in-the-nation” executive order aimed at preparing California employees, businesses, and the broader public for the potential labor market disruption associated with the ever-growing adoption of artificial intelligence.  Titled Executive Order N-6-26 (the “Order”), the Order previews the State’s forthcoming policy goals for AI regulation, as well as potential enforcement efforts.

The Order begins by outlining the current state of AI development, as well as the State’s current efforts to foster job growth and workforce development, such as job training opportunities.  The Order then announces that the State intends to “take proactive steps to manage and mitigate” AI’s potential disruptions to the workforce, education, and the economy.

To that end, the Order directs state agencies to study and collect data on AI’s impact on the California labor market.  The Order requires that, within 180 days, the California Labor and Workforce Development Agency recommend revisions to the California Worker Adjustment and Retraining Notification (Cal-WARN) Act to make the Act more responsive to AI developments.  These recommendations would result in changes to California’s layoff notice requirements related to AI-driven workforce shifts. Notably, two other states (Connecticut and New York) have adopted similar revisions to their WARN acts which require employers to notify the state of layoffs related to the adoption of AI.  And currently, there is a similar bill (Senate Bill 951) pending in the California Legislature.

The Order also creates new information-gathering requirements for state agencies.  For example, the Order tasks the LWDA with reviewing policies that provide discharged employees with safety-new protections, including severance policies and temporary work programs.  The LWDA’s safety-net review may foreshadow State-specific proposals that create new benefits for workers displaced by AI, such as mandatory severance programs.

Moreover, the Order requires the LWDA to review how collective bargaining agreements—and the union bargaining process more broadly—are addressing AI’s impact on employees.  Finally, the Order requires the California Employment Development Department to launch a dashboard that shows AI’s “impacts on employment across various sectors.”  This includes a directive to EDD to gather and report feedback from businesses about their adoption of AI into hiring and workforce decisions.

Overall, the Order does not create any new obligations for California employers.  However, it does serve as a roadmap for the State’s policy goals with respect to AI regulation.  Importantly, the Order also hints at areas where the State will likely create new regulations, which do impact employers, in the near future.  Employers should continue to monitor regulatory developments at the state level and, when in doubt, contact their employment counsel for guidance on the impact of any new regulations.

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New Test For Unpaid Volunteers at Nonprofits

by Marco A. Lucido

June 19, 2026

Question: I run a small nonprofit and have unpaid volunteers in addition to paid staff.  When am I permitted to treat an individual as an unpaid volunteer rather than an employee?

Answer: In California, an employer may treat an individual as an unpaid volunteer only if specific criteria are met.  California’s Division of Labor Standards Enforcement (the DLSE) historically took the position that the intent of the parties is the controlling factor.  Under DLSE guidance, a volunteer must donate their time voluntarily without contemplation of pay.  A recent court decision expands on this guidance and outlines a new, two-part test.

In Spilman v. The Salvation Army, the California Court of Appeal clarified when nonprofits may treat an individual as an unpaid volunteer instead of a paid employee.  The individuals who sued The Salvation Army participated in its six-month residential substance abuse rehabilitation program.   In this program, they were required to participate in “work therapy” as part of their rehabilitation efforts.  Common tasks included loading and unloading trucks, accepting and sorting donations, moving carts of donated goods, and picking up donations. In exchange, they received dormitory housing, meals, clothing, gratuities, and rehabilitation services.  They were not, however, compensated for their work.

These individuals sued, claiming that they were employees and should have been paid minimum wage and overtime.  The Salvation Army disagreed and argued that they were volunteers and therefore not entitled to compensation.   The trial court ruled in favor of the Salvation Army based on the ground that there was no “express or implied” agreement for compensation.  The trial court reasoned that an expectation of compensation is essential and that these participants voluntarily participated in the program without an expectation of compensation.  In other words, they knew they were not going to be paid, and they participated anyway.

The individuals appealed, and the California Court of Appeal reversed the trial court’s ruling.  The Court of Appeal reasoned that—unlike an employee—a volunteer agrees to work for a personal or charitable reason or benefit, rather than to earn money.  The Court of Appeal then adopted a new two-part test to make guide this distinction.

For a nonprofit to lawfully use unpaid volunteers, it must now establish both of the following: (1) The worker freely agreed to work for the nonprofit to obtain a personal or charitable benefit, rather than for compensation, and (2) overall, the nonprofit organization's use of the volunteer labor is not a subterfuge to evade the wage laws.  Regarding the first part of the test, the Court stated that the key question is whether the person was motivated by a personal benefit (like rehabilitation or giving back to the community) rather than earning money.  Regarding the second part of the test, the Court noted that any “work” requirement must genuinely serve the volunteer’s personal or charitable purpose rather than serve the organization.  The Court of Appeal also noted that the duration of a volunteer relationship may also be relevant.

Nonprofits in California should closely analyze their classification of volunteers and employees.  These organizations may explore having agreements with volunteers that make it clear they meet these new criteria.  The risks of improperly classifying an employee as a volunteer can be substantial and lead to costly claims for unpaid wages and penalties.  Nonprofits with questions about volunteer status should contact their labor counsel.

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