Unused PTO: What Are Your Rights?

In recent time paid time off (PTO) has almost fully superseded traditional vacation plans across the US. PTO policies vary since there is no country-wide legislation to support it. Most companies include PTO into their perks packages for employee retention.

And this is how it works: all of employees’ covered leave types including vacation days, sick days and hours spent on doctor’s visits or any other personal needs are subject of precise calculation. That time is eventually put together into a total number of hours/days off that employer is compensating for on the annual basis.

However, the irony is that it may be more than enough. Workaholic employees, for example, tend to accrue a lot of unused PTO. Some of the companies prefer accumulated hours to be paid out as earned but deferred wages, others seem to be less considerate and insist on “take it or leave it ” policy. In such way unused PTO is becoming a bone of contention for employees and business owners.

Unfortunately, as mentioned above there is no statutory definition of PTO and application details in the federal law of the USA. State laws in most cases treat PTO as a matter of agreement between employer and employee. Even in California, which is known for great overtime laws, there isn’t much on PTO. The best practice is to carefully read through your potential employer’s vacation policy in advance so you don’t let unused PTO come your way.

The reality of the day, however, is that awareness of PTO policy may be insufficient and things may get out of hand. So, let’s figure out what happens if you accrue time off and are unlikely to use it, given top three most common approaches to unused vacation days:

  1. “Use it or lose it” policy is the toughest one. In theory, vacation days are there to give employees some time during the calendar year to take a break, relax and come back to work refreshed and full of energy to face new challenges. That is the official reason why companies may require their employees to use their paid vacation days straight away in the danger of forfeiting them. However, in the case of employment termination, state laws and union agreements may effect and regulate eligibility for accrued PTO for the current paying period. For the benefit of workers, this type of vacation policy is illegal in some of the states, such as California, Montana and Nebraska, where it is regarded as wages and unpaid PTO is viewed as wage theft.
  2. Unused hours rollover. Often employers choose to cap how much PTO employees can accrue and roll over to the next payment period. Approaching this permitted limit an employee can’t earn more vacation time until some of it is used. Nevertheless, this is the way for an employee to accumulate PTO for a longer vacation or obtain a substantial guaranteed payment if the contract is terminated (under the agreement or a state law). As an employee, make sure you know about PTO rollover cap and there are no unaccounted hours on top of that.
  3. Unlimited PTO. Sounds like “too good to be true”, doesn’t it? Well, from a certain point of view it is so. First adopted by highly rated Silicone Valley companies, unlimited vacation plan is now coming to some smaller companies as an additional perk to lure in valued workers. But as the competition is still there and employees have to comprehend how much time off would be considered as an appropriate amount, it turns out employees are taking even less paid days off than those working for the companies with more conservative PTO. It seems that this novelty appeared to be just a way to put unused PTO debate out of the equation.

To conclude, it is important to keep in mind that an unexpected problem may pop up even if you are a well-informed and experienced employee. It may be the case if the company is unexpectedly changing its vacation policy. In such cases a consistent solution has to be found to keep both parties happy. Feel free to double-check that your unused PTO is not wasted, as there are legal and moral grounds for receiving an adequate compensation.


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