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Top half of woman's face with eyes looking up to the question, PTO of paid sick leave?

Over the last 10 years or so, companies moved toward paid time off (PTO) policies instead of offering specific numbers of paid sick days, vacation days and/or personal days. The benefits are easy to see: Employees often appreciate the flexibility, and employers have less to keep track of.

But with New Jersey’s mandatory paid sick leave law now in effect, some HR attorneys are advising their clients to re-consider their PTO policies.

The paid sick leave law took effect Oct. 29, and it requires employers to provide all employees with 40 hours of paid sick days a year, maintain one 12-month benefit year (that is not the employee’s anniversary date), requires unused days to be carried over or paid out at the end of the benefit year, and imposes stringent recording keeping and anti-retaliation requirements.

On paper, the law allows for PTO policies. The catch is, the PTO policy must meet the requirements of the law. As attorney Michael Shadiack of Connell Foley explained at NJBIA’s recent Hard Decisions seminar, those requirements mean making sick leave available to all employees and carrying over at least 40 hours of any unused time from one benefit year to the next. Employers that make the employees accrue the sick leave can offer to pay employees for their unused sick time instead, but the employee has the discretion to accept or reject the offer.

“Given the requirements of the paid sick leave law which apply to PTO policies, I try to talk employers into converting to a vacation policy and a paid sick leave policy,” said Shadiack, explaining his response to clients who ask if they can keep their PTO policies. “In my view, maintaining a PTO policy in light of the paid sick leave law is like trying to fit a square peg into a round hole.”

So if you have one PTO bank with, say, 15 days in it, now all 15 days potentially have to be available to part-time workers, seasonal workers, and temporary employees as well as your full-timers. Also, the PTO would have to be administered according to one uniform benefit year as opposed to using each employee’s anniversary date of hire, which many employers like to use for vacation time accrual.  It also means the carry-over provisions and the payout provisions apply to the full PTO policy as well.

“Does management really intend or want that?  These are factors that an employer with a PTO policy has to consider,” Shadiack said.

Shadiack indicated that other employment attorneys may have a different perspective, and added that each employer must make a decision that is best for its organization after conferring with legal counsel.  Each employer should, however, explore the pros and cons of maintaining a paid sick leave policy that meets the requirements of the law, and a separate vacation policy that can be drafted in any manner the employer sees fit (as the requirements of the paid sick leave law do not apply to vacation time) and, thus, “the employer would maintain more control,” Shadiack said.