California allows employers to cap vacation accrual but you cannot have a use it or lose it policy. Since your handbook has conflicting information about the maximum accrual, you are likely liable for accrued vacation up to the higher 225 hour cap. You should consider immediately revising the handbook to state that employees stop accruing vacation at 150 hours, but any amounts over the cap will continue to be honored. Employees will again accrue vacation in the first pay period following use of vacation which puts their accrued vacation below 150 hours.
You should immediately contact an employment attorney to assist you with revising you handbook.
It would be wise to retain the services of an employment law attorney to help you address the mistake. If the employees believe they earned the vacation pay, they could try to seek legal counsel to help them get what they "earned." It is best to resolve this matter as quickly as possible with a solid agreement for all affected employees to sign and to revise your employment manual/handbook.
I agree with Mr. Kane. Because there is an ambiguity in the handbook, it will be construed against the handbook's author. That means that the employee, who did not write the handbook, will get the benefit of the doubt. In this case, the employee will likely be considered to have accrued whatever their spreadsheet shows.
It would therefore be illegal to take away any vacation hours. Vacation hours are considered earned wages in California, and can't be removed once earned.
Consider instituting a newer, clearer policy going forward, with the limit clearly stated as 150 hours (or whatever you want it to be). While you can't take away earned vacation hours, once an employee falls below the 150 level, they will be subject to the new limit.
I hope this information is helpful for you.
Craig T. Byrnes
Disclaimer: Please be aware that I am not offering legal advice, nor forming an attorney-client relationship with you. I am not representing you, nor doing anything to protect your legal rights. If you believe that you have suffered a legal wrong, take action before any statute or limitations expires, or your right to do so may be lost forever. Good luck in your legal matter.