Denying unused PTO to fired workers
July 9, 2008 by Bill MeltzerPosted in: Compensation, Compliance, In this week's e-newsletter, Latest News & Views, Paid time off, Recognition programs
It’s gotten a little easier to deny payment for unused paid time off (PTO) to employees who are fired for misconduct.
A ruling by Minnesota’s supreme court could pave the way for similar rulings in other states. In this instance, the employer that was sued had a PTO payout policy written into its employee handbooks.
The policy stated that workers were entitled upon termination to payment for their earned-but-unused PTO – except if an employee was fired for reasons of misconduct. It also spelled out the company’s definition of misconduct, which included illegal, abusive and other inappropriate acts committed while on the job.
The firm then had employees sign an acknowledgement of having received the handbook. An employee fired for misconduct put the policy to the test. The court ruled that since PTO is “wholly contractual,” employers have the right to cancel payment if employee violates the agreement.
Before your organization takes similar action, check with your attorney about whether your firm has a formal written policy on PTO cashouts after termination and your state laws on PTO payouts.
July 10th, 2008 at 2:07 pm
I may not have current info on this, but I think in California PTO is considered vacation time (not sick time) in terms of paying any unused to the employee. My understanding is it is not legal to refuse to pay earned vacation (or PTO) time when an employee leaves, regardless of the circumstances. We can’t hold that back, or any other earned pay, as an incentive to complete their work, return keys, etc.
September 5th, 2008 at 1:35 pm
What about not paying PTO when employee resigns without giving 2 week notice as handbook states?
January 9th, 2009 at 4:11 pm
Ah yes, essentially lets steal the time that we agreed to pay the employee since they didn’t leave the right way. As an employee it’s an interesting conundrum since the employer said, this is part of your deferred benefits. i.e. we’re paying you less money since we are paying you vacation time.
So, in this market, take it away. That’s why California had passed the law about PTO.
March 19th, 2009 at 11:38 am
remember that some states are “at-will” states. This gives the employee the right to quit without a two week notice (still needs to inform management of intent) just as it gives the company the right to terminate without notice (still need justification). A company cannot punish employees for excercising their right by not paying them for any promised/earned pay or benefit due to them.