I work in Indiana but our company has a location in California. We have an employee who worked for us for almost 5 weeks. He accrued paid-time-off (PTO), but would not be eligible for it until he completed a 60-day introductory period.
He is telling us that, due to California law, the company owes him the accrued PTO. Since he isn’t eligible under the company policy, I wondered if it was correct. If he had completed the 60-day introductory period, then we would pay it out. Just wanted to confirm whether that was a specific California regulation or not.
To help us with this situation, I reached out to Andrea W.S. Paris, an attorney focused on resolving business disputes in California. I met Andrea through the Employment Law Blog Carnival, which if you don’t read, you should.
I’m delighted Andrea agreed to share her knowledge with us. Please remember that her comments should not be construed as legal advice or as pertaining to any specific factual situations. If you have detailed questions, they should be addressed directly with your friendly neighborhood labor attorney.
Andrea, living and working in a different state from the organization’s headquarters is pretty common these days. As a general rule, what employment laws apply to an employee? Is it where they live, where they work, or where the corporate offices are located?
[Paris] It could be any of the above or all of the above plus don’t forget about federal laws. As a rule of thumb, follow the law in the jurisdiction that is most protective of the employee’s rights.
For example, when it comes to wage and hour issues, California law covers workers while they are working within the state. This means that an employee of a company headquartered out of the state that doesn’t have an office in California, who is sent to California for a week is covered by California wage and hour laws for that week that s/he is working there.
This note deals with paid-time-off (PTO.) I know that the rules about paying out sick and vacation time are different in many states. Is PTO treated generally like vacation time or like sick time?
[Paris] In the context of paying out at the end of the employment relationship, PTO is treated like vacation in that accrued and unused PTO must be paid to the employee at the time of termination at the employee’s hourly rate of pay. How PTO is accrued and used is a matter of contract.
California law does not require an employer to provide employees with vacation or PTO benefits. However, the state (and some cities such as Los Angeles and San Francisco) does require employers to provide paid sick leave to employees who work within the state.
As to the reader’s question, s/he mentions that the PTO was ‘accrued’ but that the employee was ‘not eligible’ to receive the PTO. Not having seen the employee handbook or knowing how the PTO hours are accrued, it is possible that the reader is saying that the policy allows the employee to accrue PTO hours immediately upon starting work (for example, PTO is accrued at the rate of 1 hour for every 40 hours worked) but is prohibited from using those hours until after completion of the introductory period. If that is the case, the employee would have accrued 5 hours of PTO, which is considered wages and is payable at the time of termination of the employment relationship, even if at the time the relationship ended, he wasn’t allowed to use the PTO hours.
One of the things we don’t know about this situation is how the employee left the organization, meaning was it a voluntary or involuntary termination. Does that matter when it comes to paying out PTO?
[Paris] Assuming that the PTO hours were accrued and unused, it does not matter whether the employee was terminated or voluntarily left his employment. Accrued PTO hours are considered wages, thus the only significance related to how the relationship ended is when the PTO hours must be paid. When it comes to final paychecks in the state of California:
- If the employer terminated the relationship or if the employee left and gave 72 hours of notice, the accrued but unused PTO hours must be paid at the time of termination.
- If the employee left without notice, the employer has 72 hours to make the final pay check, including the PTO pay out, available to the employee.
Failure to timely pay the PTO hours (and any other wages) will accrued waiting time penalties at the employee’s daily rate of pay until the employee is paid, up to 30 days.
The reader also mentions an introductory period. Can you briefly explain why organizations establish introductory periods? Do all introductory periods work the same or does it depend on how they are set up?
[Paris] Introductory periods are also a matter of internal policy and it differs from company to company. Some companies see introductory periods as a ‘getting to know each other’ period to see whether the employee has the necessary skills and whether the employee and the company are a good fit. Usually, benefits (when they are discretionary) such as health insurance, vacation, or PTO do not accrue during the introductory period. This allows for an easier uncoupling of the relationship should things not work out early on, say in the first 30 – 90 days.
Final question. There are a few states, like California and Massachusetts, that have several unique employment laws. If an organization has employees in a state with unique employment laws, should they have a separate employee handbook?
[Paris] It is not required but would be the better practice. It provides clarity for employees and HR professionals. Additionally, a single employee handbook, if not clearly drafted, may inadvertently represent to employees in another state that they are entitled to benefits provided to workers in California or Massachusetts (for example) when the company does not provide those benefits in practice. When policies are clearly drafted, it decreases the likelihood of misunderstanding or of an employee feeling that s/he is not treated fairly.
My thanks to Andrea for sharing her knowledge with us. If you want to learn more, follow her on Twitter at @AndreaParisLaw and check out her blog. As you can see, there are no one-size-fits-all solutions when it comes to employment issues. We have to keep in mind federal, state, and in some cases local laws. While we don’t need to memorize all of the laws, we do need to have partners that can provide us with answers.
Image taken by Sharlyn Lauby somewhere in Orlando, FL1