Use-It-or-Lose-It PTO Laws by State (2026)
Updated May 31, 2026
A "use-it-or-lose-it" policy forfeits unused PTO at year-end. Whether that's legal depends on your state, because some states treat accrued vacation as earned wages that can't be taken away. Here's the 2026 landscape — and why your written policy matters most.
States that prohibit use-it-or-lose-it
A handful of states treat accrued vacation as earned compensation, so it cannot simply expire. As of 2026 the clearest examples are California, Colorado, Montana, and Nebraska. In these states, an end-of-year forfeiture clause generally isn't enforceable.
This is a general overview, not legal advice — wage-and-hour rules change and have nuances (caps and "reasonable" accrual limits are sometimes allowed even where outright forfeiture isn't). Always confirm current rules with your state labor department or counsel.
Most states don't regulate it
In the large majority of states there's no law forbidding a use-it-or-lose-it policy. That means employers can generally implement one — but only if it's clearly written and communicated in advance.
Even in unregulated states, there's a catch: if your handbook promises payout or carryover, you're bound by that promise. The written policy becomes the rule you'll be held to.
Carryover as the middle ground
Many employers avoid the legal grey area entirely with a carryover cap: unused PTO rolls into the next year up to a limit, with anything above it forfeited (where legal) or paid out. It rewards planning without creating unlimited liability.
Orvella enforces carryover caps and expiry automatically and shows projected year-end balances, so staff use their time and you stay within policy.
Frequently asked questions
Which states prohibit use-it-or-lose-it PTO?
As of 2026, California, Colorado, Montana, and Nebraska are the clearest examples of states that treat accrued vacation as earned wages, making outright year-end forfeiture generally unenforceable. Confirm current rules with your state labor department.
Is use-it-or-lose-it PTO legal?
In most states there's no law against it, so it's generally allowed if clearly written and communicated. A few states prohibit forfeiting accrued vacation. Your written policy is binding either way.
What is a carryover cap?
A rule that lets unused PTO roll into the next year up to a maximum, with anything above the cap forfeited (where legal) or paid out — a common middle ground.