Paid Time Off
What is Paid Time-Off (PTO)?
It is leave time that combines sick leave, holidays, mental health days, vacation time and the like into a pool of leave time that can be used as employees wish.
Q: So, what is the potential problem?A: Under Oklahoma law, a problem may arise since vacation leave is treated differently from other types of leave.
So, what is the bottom-line on Paid Time-Off (PTO)?
A: If vacation leave is rolled into paid time-off, how is it determined which of those hours constitutes vacation leave? Or, does the entire combined leave time fall under Section 165.3 since all of the combined hours are eligible to be used for vacation? If so, all PTO would have to be cashed out at separation from employment, not just the vacation time.
What is the definition of Wages?
Wages are defined at 40 O.S. Section 165.1(4) as “compensation owed by an employer to an employee for labor or services rendered, including salaries, commissions, holiday and vacation pay, overtime pay, severance or dismissal pay, bonuses, and other similar advantages agreed upon between the employer and the employee . . . . “ (Emphasis Added).
What happens at separation from employment?
Since vacation leave is specifically defined as wages and the statute provides for the ambiguous “other similar advantages” – the question arises how PTO would be treated at termination. We could find no Oklahoma case addressing this issue.
How is vacation and sick leave treated at termination?
Vacation leave must be cashed out at termination of employment due to 40 O.S. Section 165.3. Key legal authority on this issue is Biggs v. Surrey Broadcasting Co., 811 P.2d 111 (Ok.App.1991) and Op.Atty.Gen. No. 85-47 (May 13, 1985). Regarding the different posture of sick leave, unused sick leave is not required to be cashed out unless required by the employer’s policy. Simpson v. City of Blanchard, 797 P.2d 346 (Ok.App.1990).
Is there a potential additional problem with sick leave being combined with other leave into PTO?
Yes. Many municipal employers have a “Shared Leave” policy. A “Shared Leave” policy allows employees to donate leave time to employees who are sick or injured and have run out of sick leave. However, not all polices are the same. Some municipalities allow both vacation and sick leave to be donated while others only allow employees the option of donating vacation leave.
Q: How does Paid Time-Off disrupt these polices?
A: For those employers’ who only allow the donation of vacation time, if all the hours are combined, sick leave is comingled with other leave time and it ends up being available for donation to another employee. Thus, sick leave looses its unique character as only available for use due to illness/injury since it is now available for donation to a fellow employee.