The Basics of PTO in New Jersey
Paid Time Off (PTO) policies are plans that allow workers to gather time off with pay. As opposed to leave being separated into sick leave, personal time, and vacation, PTO combines these three categories under a single bank of hours. Such plans could cover for absences due to personal time, illness, or inclement weather. Employers should implement policies that delineate how much PTO time their employees can accumulate; when accrual occurs, how it is used, and whether the time rolls over from year to year.
PTO plans can meet or exceed the requirements stated in the New Jersey Earned Sick Leave Act. This means, both types of plans can be used to cover the same types of absence, such as personal time, illness, injury, medical appointments, matters involving domestic or sexual violence, and other reasons, including school activities. However, there are some differences between them. For example, PTO does not have the same accruing and carryover restrictions as Earned Sick Leave does. Additionally, whereas the bonuses and tip credit provisions are not welcome under Earned Sick Leave , they could be used as part of a PTO plan.
A properly designed PTO policy should address how much time employees can accrue, how that time is accrued, and what happens to that time. Specifically, it should state whether the time carries over from year-to-year or expires at the end of the year; whether the employee can use all of the time accrued, even if it means using more time than accrued; under what instance can PTO be used; procedures to request time off; the time frame in which employees must request time off; who has the authority to approve or deny requests for time off; how employees can substitute PTO for pay in lieu of time off; and whether accumulated PTO can be paid out at the time of separation or whether it must be used before that point.
Because PTO policy can potentially provide more freedom to both employees and employers, they are getting more popular. If you are considering implementing one, consider taking the above provisions (along with NJ statutes and regulations) into account.
Legal Mandates for NJ PTO
Paid time off (PTO) policies are not expressly required under New Jersey law. However, state law does mandate minimum requirements for sick leave, vacation, and other types of PTO, although by failing to follow these rules, employers legally can place themselves in a vulnerable position that may allow employees to sue them over their vacation and sick pay, for example.
Generally, PTO is classified as vacation or paid sick leave, which are not required under New Jersey law, or earned sick leave, which is.
New Jersey law does not require businesses to give employees paid vacation time. In fact, New Jersey courts have held that the State is one of the few that permits businesses to fire unproductive workers who take their earned vacation days. However, certain business and labor contracts may require signed employees to receive paid vacation days according to the terms laid out in the contract. Employers should outline any vacation days their workers earn in their employee handbook. Since New Jersey has an at-will employment status, it is not unlawful for employers to notify employees in their handbook that if an employee has accrued vacation, they will be awarded pay commensurate with that time off.
The New Jersey Law Against Discrimination (NJLAD), which became effective in December 2013, requires businesses to provide paid sick leave to certain employees if they are a company, organization, or any person who "owns or operates a business, employer, charity, religious or educational institution . . . with operations in this State, and employs either (a) 10 or more individuals at any one time during the calendar year; or (b) less than 10 individuals at any one time during the calendar year, but has gross revenue of $1 million or more." These businesses must be based in and perform their business in the State of New Jersey.
The NJLAD defines ‘earned sick leave’ as, "time away from work, compensated at the same rate as the worker normally earns from employment, that is provided to a worker so that the worker may attend to his or her personal health needs, or the health needs of a family member, or to address a circumstance resulting from an incident of domestic or sexual violence." The law also specifies that businesses must provide employees with one hour of paid sick leave for every 30 hours worked.
The law does not specify when an employee who has accrued paid sick leave must be allowed to use their time. For instance, in the case of a sudden illness, when a worker notifies their employer, the NJLAD says that the employee may use their sick leave "as soon as practicable." However, a worker should be allowed to use their sick time for preventive medical care, without notice.
New Jersey businesses are not required to give earned sick leave to employees if they already provide their employees with a minimum of five paid sick days per year. However, the law does not explain if this policy applies to full- or part-time workers, or if it also applies to employees with less than one year of service. The law also does not say if employers may include paid leave such as disability, holiday, and vacation hours in the five days calculation. To avoid confusion, employers should highlight their leave policies with employees in their employee handbook.
Accrual And Usage of Paid Time Off
Accrual and Use of PTO FAQS
Many employers treat PTO as a term and condition of employment. Unless the employer has a policy or contract that provides otherwise, accruals are actually deemed to be earned unless there is articulation in a policy or contract that the PTO is granted at the beginning of each year. PTO benefits and rules often mimic sick leave. However, unlike sick leave, PTO may be more widely used for holidays, vacation time, personal time, etc.
In New Jersey, accrued PTO is considered "earned wages." The concept of earned wages dictates that when an employee performs work for an employer, the wages become "earned" and the employee may not lose it. In fact, the New Jersey Division of Wage and Hour Compliance specifically states that "All earned unused vacation time must be paid upon termination of employment" (N.J.A.C. 12:56-7.4). Thus, a PTO policy stating that unused time will not be paid out at termination, which is similar to a vacation policy, may not be valid if the earned PTO policy is treated by the employer like vacation time and does not provide that the employee may use their PTO as they wish.
Employers often implement PTO polices that require accrual of time off. Accrual is usually in terms of hours available through their pay period, although this may differ from employer to employer. As can be seen from the chart below, the rate of accrual may vary by employer.
It is important that employers adequately communicate and notify employees of the accrual process and monitor the accrual of PTO to ensure there is no compounding loss or delay of PTO. For example, if an employee’s regular pay period is every two weeks, an employer should not allow them to accrue 5 days of PTO in the first week and 2 weeks of PTO in the second week.
Rights of Employers and Employees
As with any other aspect of the employment relationship, both employers and employees have certain rights in the context of time off under a company PTO plan. This is a two-sided coin, however, meaning that employers are entitled to enforce their policies as well, so long as they do so in a non-discriminatory and non-retaliatory manner. At the outset, an employer may require, or at least strongly encourage, that employees provide as much notice as reasonably possible when they wish to request time off under the PTO policy. Employers who do not enforce such a notification requirement risk an employee claiming that they were not aware of the company’s policy—especially when enforcement of that company policy is inconsistent. Moreover, by requiring as much advance notice as practicable, employers (and employees) have a better chance of managing business operations, while also providing employees with a system by which to properly request such time off. In practice, posting clear notifications on the company bulletin board and/or website can be immensely beneficial. In addition, training managers about the company’s policies regarding reporting and implementation are crucial, as poorly trained line supervisors and managers may not be aware of proper procedures and thereby subject the company to possible claims involving the improper denial of employee requests to take time off under the PTO policy. In terms of taking a protected absence, whether under the FMLA, NJFLA, or some other state or company-specific law or policy, in many instances, employees will be required to provide medical documentation or otherwise prove the necessity of their absence. Again, if this is not done, employers risk possible retaliation claims against them. However, confidentiality issues come into play when discussing the right to take time off. Specifically, if medical information is at issue, even though confidentiality is not expressly protected in New Jersey, employers should not undertake acts that could prejudge the validity (or lack thereof) of the employee’s claim. Finally, it is important that employers not inquire directly with employees or third parties about why the employee gave notice. Aside from damaging trust, employers run the risk of violating the employees’ rights and adversely affecting the morale of other employees.
Common Myths about NJ PTO
A major misconception and misunderstanding, is that PTO does not carry over from year to year. For instance, if an employee receives ten (10) days of PTO each year for use during the current year, the employee cannot "carry over" unused PTO into the following year. Instead, the employees must use their PTO by December 31st of each year or forfeit the amount at the end of the year if it is not used. Further, employees that accrue and/or carry over PTO at the end of the year must receive payment for the unused balance of PTO upon termination of employment. Employers may be under the impression that all accrued PTO need not be paid to employees upon termination or resignation , however, that is not the case. Lastly, PTO is distinguished from sick time in New Jersey, such as that provided in the New Jersey Earned Sick Leave Act. PTO does not have to be reimbursed upon termination, as does sick-time. Further, sick-time is not allowed to be "bunched together" with PTO. In other words, put another way, the sick-time an employee is entitled to is separate from the PTO that may be owed to that employee. As such, PTO is treated like any other earned income derived from work performed for a New Jersey employer.
How To Put PTO Policies Into Place
Implementing a PTO policy requires a comprehensive approach. When adopting a policy, employers should ensure employees understand the policy and its usage. The policy should be; explained in writing and distributed to all employees and supervisors; posted in a prominent place at the workplace; presented and explained in employee orientation sessions and performance evaluations; and regularly communicated (at least once a year). Employers should also make certain the supervisors who implement PTO policies are properly trained on the policies so they can most effectively manage the usage of PTO leave in their respective departments.
Recent Developments in NJ PTO Law
In recent months, New Jersey’s paid sick leave law has undergone various legislative amendments. On July 16, 2021, Governor Phil Murphy signed three bills into law that include numerous amendments and new requirements regarding employee pay, sick leave, and workplace accommodations. The intent behind the legislation is to extend support to New Jersey workers that have faced heightened and increased costs due to the COVID-19 pandemic. Under the new laws, employers are required to update their policies immediately.
Increased Paid Sick Leave on Account of COVID-19 Previously, the NJ Paid Sick Leave Act dictated that employers must provide a minimum of five days (or forty hours) of sick leave in a benefit year. However, as of September 17, 2021, employees can now sue their employers in NJ Superior Court where certain restrictions apply, namely: (1) that the employee lacks an adequate remedy at law; or 2) that the nature of the injury makes an award at law an inadequate and inappropriate remedy.
Additional preventative measures must be implemented by employers through "the development and publication of a comprehensive policy" to ensure that employees who take COVID-19-related paid sick leave are not penalized . These requirements include but are not limited to: These new changes cause additional concern for employers, as many interpretations of what constitutes a "reasonable accommodation" and the protection of individuals under crossroad statutes are now potentially at risk.
Implementation of Protections During A "Public Health Emergency" Governor Murphy also signed into effect new stipulations prohibiting mandatory or forced vaccination of employees and requiring employers to develop a comprehensive policy that enables employees to request a "reasonable accommodation" for existing disabilities. If an employee requests a reasonable accommodation to the mandatory COVID-19 vaccinations presupposed by the employer or otherwise required as a condition of employment, the employer must conduct an "interactive process" keeping in mind the following: Employers are also prohibited from discriminating, retaliating, or harassing any employees who have refused to comply with the COVID-19 or any other vaccine requirements.