Unlimited PTO/Vacation time is an HR hack to get around such laws.

In such schemes, you don’t earn any vacation time, so there’s not technically (and legally) any to pay out. You’re basically lazy-provisioned PTO time as it’s taken, so your legal balance of PTO Time is always zeroed out.

In traditional compensation plans, you get “X vacation days” as part of your compensation plan[1]. It can be as low as 0 since there’s no legal requirement for them, but if it’s more than 0 then thecompany also provides an earning schedule. At some companies, they allocate all PTO at the beginning of the year. At others, they allocate a prorated amount per pay period. For example, say you have 12 PTO days and are paid twice monthly. You’ll “earn” 1 PTO day per month, or half a day (4 hours) per pay period.

You can then either roll them over and stockpile them, or take them. A lot of people take less vacation than they earn, and when they terminate employment they have an accrued balance. The company is required in some jurisdictions to convert this accrued/“earned” PTO time into their equivalent salary for that amount of time and pay it out as a lump sum.

[1] Startups and other companies that advertise “unlimited” vacation are different. Unlimited is really a euphamism for 0, but with an explicit agreement to still let you take “unlimited” days off even without having any days accrued. Since you don’t accrue any days, they don’t owe you for any when you leave.