Under California law, accrued vacation is a form of wages, vests as work is performed, and must be paid out on termination of employment. In contrast, paid sabbatical leave is a special purpose, conditional benefit that is not a form of wages under the Labor Code, and therefore does need not be paid out upon termination of employment. The recent Paton v. Advanced Micro Devices, Inc. case highlights the importance of carefully drafting and implementing sabbatical leave policies.

In Paton, the employer's sabbatical leave program permitted full-time salaried employees to take an eight-week sabbatical leave after seven years of service. The program contained other conditions, which included meeting certain performance standards prior to taking a sabbatical. After seven years of employment, the plaintiff sought but was unable to take a sabbatical, first because business reasons prevented him from doing so, and a second time because he was placed on a performance improvement plan. After resigning, plaintiff filed a lawsuit to recover the value of the sabbatical leave.

The trial court granted summary judgment in favor of the employer, finding that the program constituted a sabbatical leave program, not a vacation policy, as a matter of law. A court of appeal disagreed and reversed, finding that the ultimate fact to be determined – the employer's purpose in establishing the sabbatical leave policy – could not be resolved without a jury trial. The court also identified four factors that would show that a sabbatical leave program is not regular vacation:

  1. The leave is granted infrequently. The court noted that "seven years is the traditional frequency and it seems an appropriate starting point."
  2. The leave should be longer than that "normally" offered as vacation.
  3. The leave should be granted in addition to regular vacation. The court noted that this point carries more weight when the amount of vacation offered is "comparable in length to that offered by other employers in the relevant market."
  4. The program should "incorporate some feature that demonstrates that the employee taking the sabbatical is expected to return to work after the leave is over."

Employers should carefully review their sabbatical leave programs in light of the Paton decision.