Paid and unpaid leave--at some point, people will need to take time off, for medical issues, family emergencies, childcare needs, bereavement, or other unplanned life demands. Companies need to understand what they are legally bound to offer employees for both paid and unpaid time off. For the purposes of this blog, we’ll cover what’s guaranteed for employees through the federal government and what varies by state.
Quick note: For small business owners, managing HR is hard enough let alone staying in compliance with state laws around paid and unpaid leave laws. When in doubt, consult an expert or offload your HR and employee benefits to a professional employer organization (PEO), like Decent.
PTO: Paid Time Off
PTO is almost always part of a company’s employee leave policy, and as such should be defined clearly by the HR team and in each employee’s contract or work agreement. Companies usually offer leave benefits only to full-time employees, to either only exempt (salaried) workers, or to both exempt and non-exempt (hourly) employees. This would be the number of allowed paid days off, usually for the employee to take at their discretion within the company’s official PTO policy.
Many people automatically think of vacation when they hear “PTO,” but this is only part of the story. While all vacation is PTO, not all PTO is vacation. Types of PTO include vacation days, sick days, personal days, parental leave, and other holidays the company designates. Some companies even designate a day or two of PTO for a floating holiday, so the employee may take time off to observe a personal or religious holiday as they choose.
The larger a company is, the more likely it will offer a standard number of annual PTO days when a new employee begins, “earned” through the accrual of work days (or number of hours worked) and approved by employee request in accordance with leave policy. Some companies may designate how many PTO days are allowed for vacation, sick, or personal time off. In these cases, employees accrue their PTO after working for a certain period.
Other employers will opt to give qualifying employees all of their PTO days at the beginning of the year. Sometimes employees are allowed to roll over a certain amount of unused PTO days from one year to the next, too. And some even offer unlimited PTO (a fairly newer model of PTO). How to “dole” out PTO is solely at the employer’s discretion.
While small businesses do not typically have an extensive HR team, they should have a standard PTO policy in place, if only to aid them in navigating the complex ins and outs of PTO.
Federal and some state holidays may also count as a paid day off, per the employer’s discretion, with a couple of exceptions. All federal and bank employees must receive paid time off for all federal holidays, though private employers may select observed holidays for their employees. (A couple exceptions are Rhode Island and Connecticut, where private employers must also pay their qualifying employees for state-designated holidays, a practice that is up to each private company in other states.)
Are companies required to offer paid sick leave?
Each state has unique paid sick leave laws. Sigh. Texas, for instance, does not have state laws requiring private companies to offer any paid sick leave. It means it’s up to your employer to establish the guidelines.
Are companies required to offer paid family leave?
Paid family leave is not a federal requirement. So far, only three states in the U.S. require paid family leave — California, New Jersey and Rhode Island. While companies aren’t required to offer paid family leave, at least 25% of companies do according to a 2019 Kaiser Family Foundation survey.
What are good PTO practices for small businesses?
While many states do not have paid leave laws, that doesn’t mean that most companies don’t offer PTO. Companies have to offer benefits to stay competitive in the talent marketplace. And employees’ favorite benefit tends to be vacation time.
Here are three essential tips for establishing a PTO policy, especially for small businesses with limited HR staff:'
Simplify record-keeping, even consider one PTO bank. Deciphering what might be PTO for bereavement, sickness or something else can be difficult for record-keeping. For this reason, many companies have adopted for a PTO bank that can be accrued for any type of PTO. But make sure you understand state laws before committing to a policy.
Be very transparent with your policy. Even before the employee is hired, it’s best to clearly articulate your company’s paid and unpaid leave policies. Then, after they are hired, post the policy somewhere that’s easy to access so they can refer to it when they need to.
Consider consulting an expert. As if creating HR policies wasn’t challenging enough, now you need to make sure you’re compliant with your state PTO policies. If it seems overwhelming, you’re not alone. Ask an expert or considering outsourcing your HR.
UTO: Unpaid Time Off
Unpaid Time Off is a whole different ball game, and employers need to be careful to follow all federal guidelines and administer UTO in a consistent manner. There are many reasons employees may request UTO. They may need to take care of a sick family member, recover from a serious health condition or medical procedure, or take extra time off after the adoption of a child or childbirth. Members of the military and their families qualify for additional types of UTO.
Family and Medical Leave Act (FMLA)
The most common type of UTO is covered under the Family and Medical Leave Act (FMLA). The FMLA allows for up to 12 weeks of unpaid leave within a 12-month period, during which time eligible employees maintain company-subsidized group health benefits for themselves and their families on the group insurance plan. Additionally, the FMLA allows eligible employees to take up to 26 weeks of unpaid leave within a 12-month period to care for a covered service member with a serious injury or illness.
FMLA also requires the employer to protect the employee’s job position, so the workers may return to the same or equivalent job role after their FMLA leave. The FMLA applies only to certain types of companies, and only some employees qualify for FMLA. This is where it gets technical, so bear with us as we outline employer responsibility and employee eligibility for FMLA.
What type of companies must provide FMLA?
All public agencies, including local, state, and federal employers and public schools and local education agencies must offer FMLA. Private sector employers who employ more than 50 employees (yes, small businesses, too) for a minimum of 20 workweeks in the current or previous calendar year must also provide FMLA. Per the Department of Labor, this also applies to “joint employers and successors of covered employers.”
Which employees qualify for FMLA?
Employees working for a covered employer must have worked at least 1,250 hours during the 12-month period before the leave starts. To be eligible, an employee must also work within 75 miles of a location where the employer has 50 or more employees (so for now, remote workers may not always be covered--it will be interesting to see if this changes with increased numbers of remote employees since the beginning of the COVID19 pandemic in 2020). Employees must also have worked for the company for 12 months or more total, within the seven years prior to the leave.
Qualifying conditions for FMLA include:
- the birth of a child, and to bond with the newborn
- the placement of a child for adoption or fostering with the employee, and to bond with that child
- medical leave for the employee when they are unable to work due to a serious medical condition (more below)
- time off to care for an immediate family member with a serious medical condition (spouse, child, or parent)
- “for qualifying exigencies arising out of the fact that the employee’s spouse, son, daughter, or parent is on covered active duty or call to covered active duty status as a member of the National Guard, Reserves, or Regular Armed Forces” (per the Department of Labor)
For more details on what constitutes a “serious medical condition,” whether an employer may ask for certification for a medical condition, including mental health conditions, and more on exceptions for military members and airline flight crews, please see the Department of Labor’s FMLA FAQs
Can employees use their accrued PTO during the FMLA leave?
This varies by company, as the FMLA only mandates unpaid leave. However, under the law, a company may allow or require an employee to use their accrued paid vacation, sick, or personal leave for part or all of the FMLA period. This is only applicable according to a company’s official policy. Whether or not the employee elects or is required to take PTO during their FMLA leave, the leave is still FMLA protected, so the continued healthcare coverage and guaranteed job at the end of the leave applies.
Military Leave and USERRA
The Uniformed Services Employment and Reemployment Rights Act (USERRA) is a federal law protecting unpaid time off and job reinstatement to employees who are called to active duty in the U.S. military, including the U.S. Armed Forces, Reserves, and National Guard. Eligible employees may take up to five years of UTO for military service. Under the USERRA, these service members have the right to be reinstated in their jobs when they are discharged honorably, provided they request job reinstatement within a designated period of time.
Employees returning from military service also may not be fired except for good cause within one year of returning to work. Employers may not discriminate against employees based on military service. While these are the broad conditions provided for under USERRA, additional information on state-by-state stipulations may be found on the NOLO legal library website.
PTO or UTO variations by state or job status
Time off for voting
The civic responsibility to take time off on election day to vote is decided on a state-by-state basis. In some states, employers are required to pay employees for this time off, though it is unpaid time off in others. In many states, including Texas, employers must allow employees to take time off of work to vote and pay them for any reasonable amount of time it takes to do so.
However, if an employee gets off work with two hours left to still vote at the polls, the employer does not have to allow additional time off, according to the laws of several states, including Texas. To see what your state allows for time off to vote, see the Workplace Fairness website here.
Time off for Jury Duty
Jury duty is a civil obligation that any eligible U.S. citizen over the age of 18 may get called to serve. As such, time off for jury duty is federally protected. Employers must allow an employee time off to serve on a jury. In Texas, the employer is not required to pay part-time or non-exempt employees for their time off. For salaried, exempt employees, though, the Fair Labor Standards Act (FLSA) states that an employer may not deduct the time off from these employees’ paychecks. Other states may require that an employer pay all employees for time off for jury duty. To see what applies in your state, check the Employment Law Handbook website.
That’s the basic rundown of PTO vs. UTO in the United States. If you’re not an HR professional or labor attorney, your head is likely spinning. It is a lot to take in. The sum of it is that is that paid and unpaid leave laws vary wildly by state, type of employer, and individual company policy. Keeping up to date on the policies and best practices is a lot to manage — not to mention tracking it all. Consider outsourcing your HR and offloading your risk with a PEO like Decent. Not sure what a PEO is? Check out this article or contact a Decent team member at support@decent.com.
