Does My Employer Have To Pay Earned Sick And Vacation Time When I Leave?

Can employers make retroactive changes to PTO policies?

Female doctor and nurse reading medical records in clinic
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An AOL Jobs reader asks:

Donna I have a question please. I recently found out about a change in the retirement pay out rule at the hospital where I have worked for over twenty years. I have worked all these years under the rule that when I retire I would be paid for all my saved PTO hours as well as half of the ESL hours I have accumulated which in my case is half of 520 hours. Now it seems that around three years ago they decided they would not pay out for the ESL hours. In other words, we just lose that time. I can understand if they change that rule but shouldn't that just affect people hired after the change date? This is a huge number of pay hours for a hospital if 3000 employees and just for me it will be a very big loss when I retire.

Can they legally do this?

Thank You

There are no federal laws requiring sick or vacation time, so the answer to this question will (mostly) depend on your state law. Here's what you need to know about your earned sick and vacation pay:

Employee welfare plan: While no federal law requires sick or vacation pay, many employer PTO and sick/vacation policies are considered "employee welfare plans" covered by a federal law called the Employee Retirement Income Security Act (ERISA). This means that many employers must treat earned leave as an employee benefit that must be paid out at the end of employment.

Retroactive changes: Many states consider vacation and sometimes sick pay to be part of an employee's earned wages. In those states, employers may make changes to employee entitlement and accrual of vacation or sick time. However, the changes may not be made retroactively. If, for instance, you accrued 300 hours and your policy said you would be paid out half when you left, you had 150 hours that the employer can't take away. If they change the policy to allow no payout at the end of employment and you accrue another 220 hours after that, those hours may be lost.

Use it or lose it: Most states allow "use it or lose it" vacation policies that say you must use your vacation time while employed or lose it when you leave. California doesn't permit "use it or lose" it vacation policies. However, even California allows employers to limit the amount of vacation that carries over from year to year.

Contract: If you have an employment or union collective bargaining agreement requiring payment of sick or vacation time when you leave, the employer must comply with the contract.

In the situation you raise here, it sounds like you should be entitled to the benefits you earned before the policy changed. However, your employer can probably change the policy so that you lose any time going forward if you don't use it. It's probably worth speaking to an employment lawyer in your state about your rights. The 3000 other employees and you may have a claim to the pay you earned before the change, so it could be a potential class action if the employer is violating state law.


If you need legal advice, it's best to talk to an employment lawyer in your state, but if you have general legal issues you want me to discuss publicly here, whether about discrimination, working conditions, employment contracts, medical leave, or other employment law issues, you can ask me at AOL Jobs.

Please note: Anything you write to me may be featured in one of my columns. I won't be able to respond individually to questions.

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