After months of stay-at-home orders, canceled plans, wearing masks and social distancing in public and home-schooling children, everyone needs a vacation. It’s a good thing employees have been stocking up on PTO these past few months so everyone can take a week off this summer or over the holidays this winter. Sounds like a no-brainer. Not really.
Can your business afford to have a majority of its workforce taking PTO at the same time? Do you have a cap on the amount of PTO employees may roll over into 2021? Handling employee PTO for the remainder of 2020 could present some logistical and economic issues. As employees begin returning to work, now is the time to take a hard look at your current PTO policy and make any necessary changes to ensure you are prepared to handle PTO issues and questions that are bound to come your way.
Can Employers Limit When an Employee Can Use PTO?
In general, yes. Some employers may have peak operating times that require all hands on deck. In these cases, employers may restrict the use of PTO as long as their policy allows it, and the restrictions are implementing consistently and without discrimination. It is important to note that some leave that is protected by law, such as FMLA, cannot be restricted due to business operations.
Can Employers Require Furloughed Employees to Use PTO?
Many businesses had to furlough employees due to the COVID-19 pandemic. In this case, when staff is temporarily reduced through business shutdowns and furloughs, employers may require employees to use PTO if done consistently and without discrimination. In this opinion letter, the Department of Labor states:
It is the Wage and Hour Division’s position that:
Since employers are not required under the FLSA to provide any vacation time to employees, there is no prohibition on an employer giving vacation time and later requiring that such vacation time be taken on a specific day(s). Therefore, a private employer may direct exempt staff to take vacation or debit their leave bank account . . . , whether for a full or partial day’s absence, provided the employees receive in payment an amount equal to their guaranteed salary.
Again, if an employer intends to require employees to take PTO in the event of a shutdown or furlough, the requirement must be clearly stated in the employer’s PTO policy.
Can Employees Donate Unused PTO to a Leave Bank for Other Employees?
Yes, but with careful planning. Leave sharing programs are an excellent way for employees to help each other in times of need. The IRS considers donated leave taxable income for both the donator and the recipient. However, the IRS allows for two exceptions in which leave can be donated without negative tax consequences to the donor:
Medical emergency. A medical condition of an employee or a family member that would lead to the worker’s absence from work for an extended length of time and cause a substantial loss of income.
Major disaster. As declared by the president, an event that warrants individual or public assistance from the federal government, or has severe adverse effects on a substantial number of employees.
The COVID-19 pandemic may trigger one or both of these exemptions for your employees. More information on IRS COVID-19 tax credits and be found in these FAQs.
A leave sharing policy should include the following: eligibility criteria, process for requesting and donating leave, a statement the policy prohibits discrimination or unfair treatment and an explanation for how leave is converted in the event the donor and recipient earn different hourly rates (the donated leave is converted to reflect the recipient’s rate of pay). Employers should implement a system for tracking donated leave.
Can I Require Employees to Use PTO During an Upcoming Slow Period?
Employers may opt to close operations for a week and mandate that employees use PTO for that period. Another option is to require employees to use PTO within certain parameters like requiring PTO be taken for a week in August. Employers choosing this route should act quickly and notify employees of the requirement as soon as possible to allow ample time for employees to plan their time off.
Keep Your Eye on the Prize
Employee safety and health (mental and physical) should be a priority for all employers right now. There may not be another company-offered benefit as coveted as PTO so tread carefully when implementing changes to your PTO policy. Employees are likely already feeling stressed and frenzied from months of dealing with the pandemic. You do not want to exacerbate an already difficult return to work by making employees feel you are taking away their prized PTO.
Take care not to run afoul of the Families First Coronavirus Response Act for employees requesting time off for COVID-19 reasons. Also check your state’s leave laws. Some states, like California, don’t allow use-it or lose-it PTO policies. As always, Smart HR is here to help you assess your current PTO situation, recommend needed policy changes and devise a communication plan that is thoughtful and thorough. Call Smart HR today.