Do we have to pay out accrued PTO when an employee separates?

You may have heard the news last week that Buzzfeed was laying off 15% of its workforce. You can read more about that here.

Over the weekend, about 600 Buzzfeed employees petitioned management to pay out accrued, but unused paid time off. Then, yesterday, management re-considered its initial position of not paying out PTO before eventually acquiescing.

Between the initial petition and the company’s about-face, I read a lot of “Twitter lawyers” claiming how the company’s refusal to pay out unused PTO amounts to wage theft or some other junk like that.

Indeed, I get asked this question a lot.

Do we have to pay out accrued PTO when an employee separates?

The answer, of course, is it depends.

In PA and NJ where I primarily practice law, the answer by default is no. However, if a business maintains a policy or procedure in which it promises to pay out unused PTO upon separation of employment, then that document controls, and the company must pay out unused PTO.

Some states, like CA (of course, it does), require certain payouts by law. Elsewhere, it varies.

At least according to this handy-dandy Vacation Pay State Laws Chart: Overview I found online (here). I can’t guarantee that it is 100% accurate. But, at least it’ll make you look smart-ish when you call your employment lawyer for confirmation.

What happens if we mess this up?

Bad things.

Probably a breach of contract claim. Many states also have wage payment and collection laws, which provide a vehicle to recover unpaid benefits, like PTO. In addition to the principal amount owed, there may be liquidated damages, attorney’s fees (yours and theirs), individual liability and even criminal liability too

Also, many companies account for PTO payouts when deciding how much severance to offer. It’s simple economics. If a company must pay out accrued PTO by law, then the company may decide to offer less in severance. And vice-versa. This appears to have been Buzzfeed’s initial approach.

Either way, when you separate an employee with accrued PTO, that’s one of those situations in which it’s good to have an employment lawyer on speed dial.