More and more jurisdictions are passing laws requiring employers to provide sick leave to employees. Employers that are subject to paid sick leave requirements often have questions about the impact of these laws on their existing paid time off (PTO) policies. Here are some frequently asked questions on paid sick leave and PTO:
Q: Where is paid sick leave required?
A: Currently, the following jurisdictions require (or will soon require) employers to provide paid sick leave to employees:
- Austin, Texas (effective October 1, 2018; employers with less than six employees have until October 1, 2020 to comply)
- Cook County, Illinois
- District of Columbia
- Cities in New Jersey: Bloomfield, Elizabeth, East Orange, Irvington, Jersey City, Montclair, Morristown, Newark, New Brunswick, Passaic, Paterson, Plainfield, and Trenton
- Cities in California: Berkeley, Emeryville, Oakland, San Francisco, Santa Monica, San Diego, Long Beach (hotels with 100 or more rooms), and Los Angeles
- Cities in Washington: Seattle, Tacoma, and SeaTac (hospitality and transportation industries)
- Cities in Minnesota: Minneapolis and St. Paul
- Montgomery County, Maryland
- New York City
Updated: May 17, 2018
Q: What is the difference between a paid sick leave policy and a PTO policy?
A: A paid sick leave policy is a standalone policy that offers time off for illness and certain other situations. A PTO policy bundles various types of leave, such as vacation, sick, and personal leave, into a single bank that employees can use for any purpose.
Q: My state requires me to provide paid sick leave to employees. Can I keep my current PTO policy?
A: Under many of the paid sick leave laws, if you have a PTO policy, you generally don't have to provide additional paid sick days to employees if the policy:
- Allows employees to use the same amount of leave for the same purposes and under the same conditions as required by the sick leave law; and
- Satisfies the accrual, carry over, and use requirements of the sick leave law.
Check your applicable law to ensure compliance.
Q: My state paid sick leave law allows me to provide leave through a PTO policy. One of my employees just requested sick leave, but he has exhausted all of his PTO for the year on vacation. Do I have to offer additional paid leave to this employee?
A: Under many of the paid sick leave laws, no additional leave would be required if the PTO policy met the requirements listed in the answer above. When implementing your PTO policy, to help your employees manage their time off, clearly communicate what they can use PTO for, how it accrues, and the other requirements of your plan. Depending on the circumstances, the employee here may qualify for sick leave (typically unpaid) under a different law. For example, the federal Family and Medical Leave Act requires employers with 50 or more employees to provide unpaid leave to eligible employees for specified family, medical, and military reasons. Many states have similar laws that cover employers with fewer employees. Check your applicable laws to ensure compliance.
Q: What are some advantages and disadvantages of having a PTO policy instead of a standalone paid sick leave policy?
A: In general, PTO policies give workers more flexibility to use their leave to fit their needs. For employers with employees in multiple jurisdictions with differing paid sick leave requirements, a PTO policy can be an attractive option because a single policy (and the same amount of leave) can generally be offered across jurisdictions, provided it meets the requirements of the most generous paid sick leave law.
Another advantage of a PTO policy is that it can ease the administrative burden of tracking precisely how the leave was used. However, employers should still familiarize themselves with their obligations under applicable paid sick leave laws, since many have specific recordkeeping requirements.
Sick leave laws don’t typically require that employers pay for unused sick leave when an employee leaves the company. However, if you use your PTO policy to meet sick leave requirements, in some states, such as California, you would be required to pay out all unused PTO at the time of separation. This could mean employers would face additional costs paying for unused sick time if they bundled their sick leave into their PTO rather than if they offered separate sick leave. In some states, this may also be true if the employer uses a vacation policy to satisfy the sick leave law.
Note: Seattle's paid sick leave law requires employers with 250 or more full-time equivalent employees to provide more time off to employees if they maintain a PTO policy instead of a standalone sick leave policy (108 hours versus 72 hours).
When determining whether to have a PTO policy or separate sick leave policy, identify your specific business needs and evaluate the laws that apply to your employees.