Our company has a paid time off (PTO) policy entitling employees to paid vacation and sick leave. When they request time off, can they choose to use unpaid leave instead if they still have a PTO balance?

In Wisconsin, an employer isn’t obligated to offer PTO to their employees, including paid vacation or sick leave. Federal law also doesn’t require employers to provide PTO or paid or unpaid vacation time or sick leave.

Likewise, a Wisconsin employer isn’t obligated to offer unpaid time off—excluding federal and state law-mandated leave, such as the Family and Medical Leave Act (FMLA) and the Wisconsin Family and Medical Leave Act (WFMLA) or unpaid disability accommodation leaves. If an employer elects to offer its employees PTO or unpaid leave as an employment benefit, however, it may impose certain limitations or restrictions on its use, subject to the aforementioned FMLA and WFMLA (for qualifying medical or family leaves).

If an employer voluntarily elects to offer either PTO or unpaid vacation time (in an at-will employee relationship), it will typically have an established policy outlining how much leave an employee is entitled to and how she can use it. The policy will typically include other terms, such as:

  • Whether the time off available each year expires or rolls into the next year;
  • Whether she can accrue additional leave or whether the total amount is capped; or
  • Whether her available leave is paid out after a resignation or termination.

Likewise, the policy may dictate whether—if an employer offers both paid and unpaid leave—an employee may use unpaid time off before using PTO for vacation time. It may indicate her failure to abide by the policy results in forfeiting of the benefits. Therefore, it could theoretically dictate she forfeits all PTO for vacation time if she elects to use unpaid time off—though it would seem unlikely any employee would then try to use unpaid time off before using banked PTO.

Paid or unpaid leave is slightly different if the FMLA or the WFMLA is implicated. If an employee is entitled to leave under the FMLA, which is unpaid leave, the employer may require (or an employee may elect) that she use or “substitute” paid leave (e.g., PTO, paid sick leave, or paid vacation leave) to cover the unpaid FMLA entitlement period.

So, if an employer’s policy grants employees two weeks of paid sick leave for use and she is approved for 12 weeks of FMLA leave for a qualifying event, it may require her to use or substitute the two weeks of paid leave during the FMLA leave. She then would be on leave for 12 weeks, with two weeks paid and 10 weeks unpaid. Under the WFMLA, employees may elect but cannot be required to use their paid leave to cover unpaid WFMLA leave.

If the FMLA or WFMLA isn’t implicated, the same guidelines and information regarding paid or unpaid vacation, sick, or PTO time would apply. Namely, the employer can implement policy guidelines and restrictions on use, including how the leave may be used, how it is triggered (i.e., whether a doctor’s note is required), or whether paid leave must be used before unpaid leave.

This article, slightly modified to note recent updates, was featured online in the Wisconsin Employment Law Letter and published by BLR®—Business & Legal Resources. Reproduced here with the permission of BLR®—Business & Legal Resources.