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Posted on November 16, 2016 in Assets,Community Property

Vacation pay in a divorce: This is a good example of an asset that should not be missed. When the time to divide assets in a divorce case arrives it’s important to make sure all of the community property has been addressed. Some property items are more obvious than others. For example, people probably aren’t going to forget about a house, a large bank account, or retirement accounts. On the other hand, there are less obvious, though not insignificant, types of property that can be overlooked if one is not careful.

One of these items is accrued vacation pay. A month or more of accrued vacation pay can be worth several thousand dollars depending upon one’s pay rate.

In Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, the California Supreme Court held that the right to paid vacation constitutes deferred wages for services rendered. The court said that a person’s right to a paid vacation vests as labor is rendered.

The Suastez case concerned a labor dispute between Mr. Suastez and his employer, Plastic Dress Up Co. The employer refused to pay Mr. Suastez for vacation pay that he earned before his employment ended. Mr. Suastez filed a lawsuit requesting payment for the vacation pay and he won. On appeal, the case ended up at the California Supreme Court, where the Court reasoned that an employee’s vacation pay “vests” as it is earned by the employee.

Under Family Code section 760, all property acquired during the marriage while domiciled in California is community property. Consequently, under Suastez and Family Code 760, vacation pay earned before the date of separation is community property.

Family Code section 2550 directs that the community property estate must be divided equally. Accrued and vested vacation pay earned during marriage may be treated as community property. Therefore, the accrued vacation pay that was earned before the date of separation must be considered when dividing the overall community property estate.

In a more recent appellate opinion, California’s Third District Court of Appeal held that accrued vacation benefits are a property interest that, to the extent earned during marriage and before separation, are divisible community property at marriage dissolution. Marriage of Moore (2014) 226 CA4th 92.

Note that there is a minority opinion (not accepted by many people) which says vacation pay should not be treated as an asset unless it can be immediately converted to cash by the employee. However, this view is not well regarded in light of the much more compelling and accepted position that vacation pay earned during marriage should be treated as community property and divided equally.

To learn more about vacation pay in a San Diego divorce case, please contact Attorney Scott Family Law, CFLS. Mr. Scott is a Certified Family Law Specialist with more than 35 years of divorce litigation experience. Schedule an appointment to meet with Mr. Scott today by calling 858-974-4900.