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The sun will rise. Trump will tweet. Haters gonna' hate. Employees will take time off. Necessity. Personal choice. Laziness. Family obligations. Freeloading. It does not really matter the purpose or motive behind the leave because, as a business matter, an employer pays wages, benefits, and overhead, and here is an employee wanting all that and not to do any work. Accepting that inevitability is the first step to deciding how to create a PTO policy tailored to your industry, your company, and your employees. Here is a short list of important considerations when implementing a PTO policy.

1. Acknowledge and believe the benefits of PTO.

If you (or any manager, supervisor, or HR personnel) are fundamentally against paying employees for vacation, sick leave, or personal days, your employees should never know it. It should be your best-kept secret. Capitalist, pro-business leanings aside, no employer wants burned-out, unmotivated employees with bad attitudes and low morale; and no employer wants to pay exorbitant headhunter fees due to low recruitment and high attrition. Paid time away from the office helps, but only if those in charge actually believe that employees who use PTO (appropriately) are generally happier and more productive. PTO as an employee benefit is ineffective if management begrudges and questions the use of PTO, particularly for vacations or personal days.

2. Have a clear, written policy on the accrual and use of PTO and guidelines on how to implement that policy.

Whether an employee is on Day One or Day 10,000, the PTO policy should be written in understandable, layperson language and explain when and how that employee's PTO accrues, and how and when that employee can use his or her accrued PTO. The policy should also explain what happens to unused PTO—at the end of the year? if I choose to leave? if I am let go? if I am fired?

None of these generic issues will be the question that comes across your desk. Your question will be one-of-a-kind and completely obtuse: "If I am an exempt employee, and I used all of my PTO for the year in advance to go to the Australian Open in January, what am I supposed to do when I get a summer cold in June or the flu in October?" (See #7 below.) Whatever answer you come up with, keep it in an electronic folder or add it to a memo, or print it and drop it in a file cabinet folder old-school style. The document or folder should be considered attorney work product and only shared with those who have a need to know, although it would be helpful if it was accessible to HR. These experiential questions and answers may be significant enough to update the policy. More likely than not, adding such details would create an unwieldy PTO policy, but retaining that information is helpful for corporate continuity and to reduce the law department's burdens.

3. Drive your PTO policy with the three questions: "Does this policy help or hurt the company's bottom line? Are the clients/shareholders being taken care of? And does the policy makes this a better place to get work accomplished?"

To aid in the implementation of a policy behind which all of the C-Suite and your employees can rally, keep the end game in mind. Instead of downloading the first PTO policy that comes up in a Google search, spend the time to create a policy that answers "yes" to those three questions for your company

4. Check for state and local laws in every city in which your company has employees.

The number of state and local paid sick leave laws is growing: New Jersey, Rhode Island, and Maryland joined, or will join, the list in 2018, which list already includes Arizona, California, Connecticut, Massachusetts, Oregon, Rhode Island, Vermont, Washington, and Washington, D.C. For many employers, these state and local laws define the policies for them, or they may choose to provide broader protections. Employers must stay in the know and keep eyes and ears out for changes in other states that may not currently have paid sick leave laws.

The contours of these state (and local) laws vary. Some cover employers of a certain size versus all employers. Some mandate a certain number of hours of paid sick leave per year. Some limit which employees are covered. Some define whether an employee's dependents, immediate family, or extended family members are also covered. Some designate the rates of accrual of the paid sick leave (e.g., earn 1 hour every 30 hours worked, earn all at the start of the year). Some legislate how and when the leave can be used (e.g., after 4 months).

If an employer has a PTO policy that does not differentiate between sick leave and vacation leave, that existing policy may be compatible with the state or local law and able to stand without revision. But it may not. More than likely, an employer's PTO policy would benefit from at least tracking the basis for any used leave, so that sick leave can be calculated. It may be that a traditional leave policy—with separate buckets for sick, vacation, and personal leave—is more appropriate in a more heavily regulated jurisdiction.

5. Analyze adverse employment actions based on PTO use or abuse first to determine whether the employee was or should have been using FMLA leave or had or should have had a reasonable accommodation for an ADA-qualifying disability.

Some employers link PTO policies with attendance policies leaving managers to think: paid leave is an approved absence; unpaid leave is an unapproved absence. This is, of course, a false statement. An employee may have a significant amount of sick leave over and above the stated PTO. Sometimes an employee may have requested FMLA-protected leave. Other employees either may not have qualified for or may not have realized that they could have used FMLA protections and, instead, accrued enough unapproved absences to warrant disciplinary action. It is easier to suggest to an employee that he or she may need to consider seeking FMLA protection than to defend an FMLA interference and retaliation lawsuit.

Similarly, although "paid" leave is not a reasonable accommodation, a finite period of additional leave, above and beyond an allotted amount of PTO, could survive as a reasonable accommodation. Taking the time to analyze the issue first and making sure HR knows to analyze or escalate the issue first, could save the company significant time, money, and trouble.

6. Require legal approval and heavily document exceptions to how your company implements its PTO policy .

My eleventh-grade physics teacher led me to believe it was ok to speed. What he actually said was: "Speeding does not cause accidents. Accidents are caused by a change in speed. If everyone is driving around I-285 going the average rate of 87.6 miles per hour, no one would get hurt. It's the dummy going from 88 to 45 that causes the wreck." Yes, whether we are all following the rule and one person does not, or we are all not following a rule, and one person behaves differently, it is the exception to what is commonly done that gets the attention and can cause a legal wreck. Thus, if you have an employee with no remaining PTO (including all state-law mandated paid sick leave), but you generally do not take any action against such an employee. Then, the day it is decided that Employee 24601 must be terminated, the reasons behind this departure should be carefully documented and ideally include an explanation based on a legitimate, non-discriminatory reason to terminate that employee and not others who have skirted the PTO policy. Conversely, if the policy is strictly enforced, but one employee is given some exception or allowance, it makes sense to document why an exception was made in that instance.

7. Handle PTO (or the lack of PTO) for exempt employees differently from non-exempt employees.

Theoretically, employers derive a benefit from having exempt employees who agree to work without regard to the number of hours the work requires each week. For that potential benefit, employers relinquish their freedom to reduce the salary or wages of exempt employees when they do not work "full" workdays or workweeks.

• Non-exempt employees may be docked wages for any time not worked • The employer should still track PTO for an exempt employee. • If an exempt employee has exhausted her PTO:

o Partial work days must be paid in full—no salary reduction
o One or more whole days off for personal leave (not sickness or disability) may reduce an employee's salary, given there is an adequate basis to determine the employee's daily rate and no work is done
o FMLA leave, whether continuous or intermittent, can reduce an exempt employee's wages
o One or more whole days off for sick leave may reduce an employee's salary, given there is an adequate basis to determine the employee's daily rate, no work is done, and the employer has a plan for salary reductions (not recommended)
• An employer can disapprove of vacation requests if there is no PTO. • An employer can discipline an exempt employee, in accordance with its attendance policy, which could include termination for excessive absences, assuming there was no other legal protection for such leave. • A harsh recourse, but an employer could also make an employee non-exempt permanently or for a period of time

8. Closely monitor remote work/PTO situations and establish clear guidelines and expectations for remote workers.

Remote workers fall within a spectrum of productivity, while some thrive in a home office, others are too easily distracted by actual home work. Use of partial day PTO is commonly combined with working remotely for the day now that technology permits, but it can be administratively burdensome to keep track.

For non-exempt employees, it is important to establish that the employee's hours will be determined by time logged and active on the computer or something otherwise discernible. Or, the remote work policy can establish that remote work may not be used on the same day as PTO.

For exempt employees, working remotely on any day requires full pay, unless the exempt employee is working remotely and using unpaid FMLA leave for part of the day after exhausting all PTO.

9. Consider whether an unlimited PTO policy is right for your workforce.

Employers with offices across the globe who must cater to employees accustomed to more paid time off may want to consider an unlimited PTO policy. Even employers with U.S. employees but who come from other countries may want to consider implementing an unlimited PTO policy that more closely mimics what non-American employers are doing.

Similarly, employers with remote workforces or largely exempt employees may find that the lessened administrative burden and the perceived benefit to employees outweigh the leap of faith that employees will not abuse such a policy. Most companies do not report widespread abuse, but instead find that employees, especially American employees, do not take enough personal time.

10. Treat sick leave PTO carefully and share on a need-to-know basis.

During a recent employment discrimination investigation, I noticed numerous emails from the complainant's supervisor informing the entire team about the complainant's absence due to illness. A few of the emails even included details about the nature of the illness that seemed risky and an unnecessary violation of privacy. Simple word of caution to keep the disclosure of that kind of private health information as limited as possible to avoid ADA, GINA, FMLA interference and discrimination, and HIPAA violation claims or even the suggestion of such claims.


Employees have been taking leave forever, and in a high-demand world where newer, sexier problems claim a legal department's attention, it is difficult to make it a priority to review or update a policy that everyone seems to know. Yet, new state and local sick leave laws, privacy laws (e.g., HIPAA and GDPR), the ADA and FMLA, and the increase in remote working arrangements and attention to work-life balance and wellness all combine to make employee leave a more critical topic with more hidden traps than expected.

Region: United States
Interest Area: Employment and Labor
The information in any resource collected in this virtual library should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or ACC. These resources are not intended as a definitive statement on the subject addressed. Rather, they are intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.

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