I’m often asked to review the benefits and paid leave provisions in employer handbooks. Employers tend to focus first on retirement and health benefits, but significant compliance issues show up elsewhere. By far the most common multi‑state problem I see is an attempt to address state leave requirements with a one‑size‑fits‑all PTO policy. This approach is usually adopted with good intentions and a desire to offer employees generous paid time off. As a bonus, a single PTO policy simplifies administration by avoiding different accrual, usage, carryover, and notice rules across jurisdictions. But that convenience can quickly become a liability when the policy isn’t designed around the laws of the jurisdictions where their employees work.
There is no general federal law requiring employers to provide paid leave, so states have stepped in with their own mandates. Twenty states (plus DC and numerous local jurisdictions) require some form of paid sick leave, and 13 states (plus DC) have adopted mandatory paid family and medical leave (PFML) programs. For multi‑state employers, this creates a patchwork of overlapping and sometimes inconsistent requirements. Complicating matters further, these laws generally apply based on where employees work, not where the employer is located. As a result, an employer with a single location in a state without mandated paid leave may still be subject to these laws because of employees working remotely in other states, a reality that continues to catch many employers by surprise.
A PTO policy can be structured to satisfy multiple different paid sick leave laws, but only if it is carefully designed. The traps that consistently show up in my reviews of PTO policies are:
- restricting PTO to only full-time employees
- imposing a waiting period before use of PTO or a rigid advanced notice requirement to be eligible for use of PTO
- utilizing a use-it-or-lose-it strategy by not permitting carryover of leave from one year to the next, and
- failing to deliver required employee notices.
Even when the amount of PTO is generous, paid sick leave laws often protect use for reasons that go well beyond what employers traditionally label as sick time (e.g., bonding time with a new child, attendance at school related events, bereavement, inclement weather, blood donations, and obtaining subsistence benefits or housing), and a policy that limits use to narrow categories can be noncompliant even if the PTO bank is large.
PFML is where one-size-fits-all PTO policies most often break down. A PTO policy by itself does not comply with state PFML. PFML laws typically create state-administered benefits programs that are funded through employer and payroll contributions. Employer compliance with the laws requires registering with the relevant state agency and making quarterly contributions, providing employee notices, and ongoing reporting and recordkeeping (none of which are satisfied merely by offering PTO). Some states allow private plan alternatives, but those generally require an application and approval by the state that the private plan meets its statutory requirements.
The practical takeaway is that for many employers, paid leave is no longer a voluntary employee benefit. Multi-state employers are in a difficult position and must carefully review their benefits against state and local laws. If you operate in multiple states (or have even a handful of remote employees scattered across jurisdictions), the most workable approach is often a coordinated strategy that aligns a PTO policy with paid sick leave requirements while separately addressing PFML administration and compliance. If you have any questions on paid leave laws or designing a policy to comply with laws in multiple jurisdictions, please contact a member of our employee benefits team.
