Annual leave entitlement in the United States
Reviewed by Mellow Editorial Team, HR & payroll content team
There is no federal law requiring US employers to provide paid annual leave. Whether you get it, how much, and how it works depends entirely on your employer's policy and, in some cases, state or local rules.
The federal position: no statutory entitlement
The Fair Labor Standards Act (FLSA) sets federal rules on minimum wage and overtime, but it says nothing about paid vacation. Unlike most other developed countries, the US has no federal minimum for paid annual leave or paid public holidays. Employers are free to offer as much or as little as they choose — including nothing at all.
This is not a gap that is about to be filled at the federal level. Several bills have proposed a statutory minimum over the years, but none has passed. For now, paid leave in the US is a benefit, not a legal right.
How employer vacation policies actually work
Most employers do offer paid vacation because it helps attract and keep staff. Common structures include:
Accrual-based policies. Employees earn a set amount of leave per pay period or per hour worked. Someone might accrue one day of vacation for every month worked, reaching 12 days after a full year. New hires often wait 90 days before they can use any accrued leave.
Lump-sum or "front-loaded" policies. The employer grants the full year's allowance at the start of the year. The risk for the employer is that an employee uses all their leave and then resigns.
Unlimited PTO. Some employers, particularly in tech, offer no formal cap. In practice, employees often take less leave under these arrangements, not more, because there is no accrued balance to use as a reference point.
PTO banks. Many employers combine vacation, sick time, and personal days into a single paid-time-off bucket rather than keeping separate categories.
Carry-over, caps, and "use it or lose it"
Whether unused leave carries over to the next year depends on both the employer's policy and state law.
Some employers impose a "use it or lose it" rule: any vacation not taken by the end of the year is forfeited. California prohibits this practice outright — accrued vacation is treated as earned wages under California law and cannot simply be cancelled. A handful of other states take a similar position. Most states, however, permit use-it-or-lose-it policies as long as the employer communicates them clearly.
Employers in states that allow forfeiture often pair the policy with an accrual cap — once you hit the cap, you stop accruing until you use some leave. This avoids large, open-ended liability.
Payout on termination
Whether an employer must pay out unused vacation when an employee leaves is another area governed by state law, not federal law.
California again stands out: because accrued vacation is wages, employers must pay it out on termination. Colorado, Illinois, and several other states have similar requirements. In states with no specific rule, payout depends on the employer's written policy. If the policy says "no payout on resignation," courts in most states will uphold that.
This makes your written policy document important. If you promise payout in your employee handbook, you are generally bound by that promise even in states that do not require it by law.
Public holidays
There are 11 federal public holidays, including New Year's Day, Independence Day, Thanksgiving, and Christmas. Federal employees are entitled to these days off. Private-sector employers have no legal obligation to observe them or to pay a premium for working on them. Most large employers do close or offer holiday pay as a standard benefit, but it is a matter of policy, not law.
State and local paid leave laws to watch
While there is no federal vacation mandate, paid sick leave laws are spreading. As of mid-2026, more than a dozen states — including California, New York, New Jersey, and Massachusetts — require employers to provide some amount of paid sick leave. Some cities and counties have their own rules that go further than state law. These sick leave mandates are separate from vacation and apply regardless of whether the employer offers any vacation at all.
If you operate across multiple states, your policy needs to account for the highest applicable standard in each location. A single national policy set at the federal floor — which is zero — will leave you non-compliant in states with mandatory sick leave. For employers managing workers in several states, keeping track of the patchwork of local rules is one of the more practical challenges in US HR. How Mellow runs payroll across six countries illustrates how layered compliance works when you are dealing with multiple jurisdictions at once.
The clearest practical rule: write your leave policy down, make sure it meets every applicable state and local requirement for each location where you have employees, and apply it consistently.
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