A Practice Note discussing the legal issues to consider and best practices to follow when drafting a paid time off (PTO) or paid vacation policy for use in California. It addresses how a PTO policy can satisfy California's paid sick leave requirement under the Healthy Workplaces, Healthy Families Act, as well as other legal requirements unique to California regarding vacation accrual and pay. This Note discusses options for employers to draft policies that comply with the new law while maintaining flexibility in their business operations. It is based on California law.