August 13, 2013

It is important to clarify in the handbook how PTO/Vacation/Sick time is accrued and how accrued, but unused, PTO/Vacation/Sick time is handled at termination. Some states' laws address this issue. Most states, however, will only require that accumulated time be paid, if the employer's policies provide that right to employees.

In Florida, for example, if an employer's policy provides for payment at termination, then an employee has a statutory claim against the employer should these benefits be not provided at the time of discharge. However, the employee has no right to payment in the absence of an employer contract or policy providing such a right. Thus, it is vital to spell out in the handbook how such benefits are accrued and how they are paid at termination to avoid claims against the employer for unpaid time.

The FLSA does not require that these benefits be provided at all and does not govern accrual or payment of such benefits. However, use of this time may impact exemptions under the FLSA. Generally, an employer may not make deductions from the salary of an exempt employee or it will lose the exemption, because the employee will not be deemed compensated on a salary basis. However, an employer may dock the pay of a salaried employee for absences from work for one or more full days due to sickness or disability if the deductions are made under a bona fide plan, policy or practice of providing wage replacement benefits for these types of absences. Further, an employer may provide unpaid leave under the FMLA.

Thus, if an employee is sick and has used all of the PTO or Sick time due to that employee, and the absence is for one or more full days, then the employer may dock the exempt employee's salary. Moreover, if the employee's absence is covered by FMLA, the employer can require the employee to utilize all available paid leave, and then may deduct FMLA leave from the salary. These conditions for deductions pursuant to the PTO/Vacation/Sick Time policies, as well as all requirements for use of the paid leave, should be spelled out in the employee manual.

Author:
Scott T. Silverman
Akerman Senterfitt

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