Unlimited Time Off Presents Hidden Challenges for Employers
We have increasingly been fielding inquiries from organizations that are looking to implement some version of unlimited time off for their employees. They saw that employees continued to be productive while working remotely during the pandemic, and they want to give them the flexibility to take time off as/when needed – provided the work still gets done. The motives behind these policies are commendable, but the challenge lies in their implementation.
Consider Scope as to Legally Required Time Off
Employers currently face a myriad of paid leave requirements, which vary by state and locality. These laws may mandate paid time for sick leave, domestic violence victims, care of family members, voting, jury service, witness duty, blood donation, bone marrow donation, attending school meetings and activities, public health emergencies, bereavement, or for no specific reason at all. When considering an unlimited time off policy, employers need to determine whether the policy is intended to cover some or all of these paid time off legal requirements.
Employers are also required in various locations to provide a range of unpaid time off, which may include family and medical leave, pregnancy disability leave, military leave, family military leave, leave for first responders, leave for crime victims, and lengthier leave for jury service. Some states offer partial compensation through state-regulated programs for certain periods of unpaid leave. In most circumstances, even the biggest proponents of unlimited paid time off do not intend to pay for the time used during most or all of these leave periods, particularly not for legally required leaves that can extend for months at a time. The scope of the unlimited time off policy in relation to legally required leaves needs to be determined in advance so that policies can be properly drafted.
Is This Just for the Employee’s Self-Care, or Family Too?
Also when considering scope, employers should determine whether they want unlimited paid time to be available for care of family members. Employers may intend for the unlimited paid time to cover employees who are themselves ill or injured, even for extended periods of time, and they can cap their payroll exposure by requiring qualifying employees to apply for short-term and long-term disability benefits for more extended absences. However, most paid sick leave laws are not limited to leave for the employee’s own illness or injury. The sick leave laws extend to family members – often spanning multiple generations and even individuals who are “like” family but with no blood or marital relationship.
Granting unlimited paid time off to care for family members can quickly leave an employer in an awkward situation of trying to balance its broad policy offering, the statutory protections that cover at least part of the leave time, and the need to have the employee get work done. Some employers address this by carving out care of family from their “unlimited” time off policies. They may choose to grant only the legally required leave for care of these individuals, or may provide a benefit that is more generous than the law, but less than “unlimited.” Other employers reframe the unlimited time off policy as intended for discretionary and personal reasons, akin to a combination of vacation, personal days and flexible holidays, and maintain a separate, statutory-compliant paid sick and safe leave policy that caps the amount of time employees can use for their own or a family member’s illness, injury or related medical or safety reasons.
Consider Approvals and Documentation
The temptation and appeal of an unlimited policy is to be free from all the legal mandates related to time off policies. Senior leaders just want employees to be “responsible adults,” take the time they need and make sure they do their jobs.
The reality is that reasonable minds will differ as to when an employee is acting responsibly when determining when and for how long to take off from work. “Unlimited” time does not relieve managers of the responsibility to manage their employees.
While requesting medical or other documentation in support of a time off request may seem superfluous if the time off is “unlimited,” such documentation can be critical to ensure that, when time is being taken for legally protected reasons, it is given appropriate consideration. And when time is being taken “just because,” managers should have greater flexibility to advise employees if the scheduling of that time off would be contrary to business needs, and delay or deny those requests.
Spell It All Out in Writing
An unlimited paid time off policy must address all the above considerations and the parameters that the employer has chosen to set with regard to the scope, use, timing, and ancillary requirements under its policy. To the extent that paid or unpaid leave laws may require specific language or provisions to be included, that too should be folded into the unlimited time off policy – if the leave law is intended to be satisfied through the unlimited paid time off policy. And if the legally protected leave is being carved out as an exception to “unlimited” paid time off, then that needs to be made clear in the written policies as well.
Finally, in those locations where paid sick leave and other specific time off accruals and usage need to be reflected on pay stubs or elsewhere, employers should consult with legal counsel and their payroll provider as to where and how accruals should be reflected. Some jurisdictions have held that no accruals need to be posted when a policy grants unlimited time, while other jurisdictions have been less clear on how that notice requirement is to be satisfied.
Legislators mean well when they adopt new paid and unpaid leave requirements. But these laws are often written from the perspective of protecting employees from miserly employers. They can feel unduly constricting to generous employers that want to give employees time to relax and manage their personal obligations, but do not want to run afoul of the law.
Some version of “unlimited” time off is achievable even in the most regulated localities. The policies just need to be thought through in advance, in the context of applicable leave laws, and drafted to cover the relevant parameters. This is one of those situations in which it would be prudent to seek guidance from legal counsel.
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