California employers can't implement use it or lose it policies for employees' PTO. However, employers can place a cap on PTO accrual.
Ordinarily, employees accrue paid time off (PTO) as they work. For example, for every one month of work, an employee might gain 2 days of PTO. A PTO accrual cap establishes a limit to the amount of PTO an employee can accrue.
California doesn't allow a use it or lose it policy - where employees completely lose any unused PTO. In California, earned vacation days are considered wages and employers, then, can't have employees forfeit those wages, even if the employee is terminated.
California employers can place a limit on employees' PTO accrual. This means after an employee reaches a certain number of days, they stop accruing PTO. For example, after an employee earns 150 hours of PTO, they can't earn any more until they use some of that 150 hours. There's no state-determined accrual cap, rather, employers can choose their own cap as long as it is deemed reasonable.
PTO accrual caps are allowed by California employees, as long as the caps are reasonable. Employers can also choose to pay employees for their PTO hours since they are considered wages.
Leave and Time Off - hr360.com - A general guide to time off policies
Sick Leave: Accrual and Limitations CA.gov - A 2015 act passed about California sick leave