When an employee resigns, a common concern is the status of their accrued Paid Time Off (PTO) and whether they can use it during their final weeks. The answer is not universal and depends on two major factors: the employer’s specific policies and the employment laws of the state where the employee works. Understanding these intersecting rules is necessary to ensure you do not forfeit this earned benefit.
Understanding PTO and Notice Periods
Paid Time Off (PTO) is a benefit allowing workers to take paid time away from work for personal reasons, illness, or vacation. Accrued PTO is often viewed as a form of earned compensation, similar to wages, accumulating as an employee performs work. The notice period, typically two weeks, is the timeframe between an employee’s resignation date and their final day. This period facilitates a smooth transition of duties, completion of outstanding projects, and allows the employer time to prepare for the departure.
Using PTO During the Notice Period
Employees often request to use remaining PTO to shorten their final working days or to take a paid break before starting a new role. While an employee can submit a request for time off during the notice period, the employer retains discretion to approve or deny it. This right is rooted in the employer’s operational necessity to manage workflow and complete the transition process.
Employers may deny a PTO request during the notice window to ensure adequate coverage or to guarantee the employee completes necessary tasks or training for their replacement. Requesting a full two-week PTO block may be viewed as failing to fulfill the purpose of the notice period, potentially leading to denial. If the request is denied, the employee is expected to work the full notice period. The unused PTO then becomes subject to the state’s rules regarding payout upon separation.
State Laws Governing PTO Payout
Whether an employer must pay out unused, accrued PTO upon an employee’s separation is determined by the wage laws of the state where the work is performed. Unlike PTO usage, which is largely controlled by employer discretion, the payout of accrued time is a matter of legal compliance. States fall into three categories regarding this obligation, hinging on whether accrued vacation time is legally defined as earned wages.
States Requiring Payout of Accrued PTO
Some states mandate that all accrued and unused vacation time must be paid out to the employee upon separation, regardless of the employer’s written policy. These states, which include California, Colorado, Massachusetts, Montana, and Nebraska, legally classify accrued vacation as earned wages that cannot be forfeited. In these jurisdictions, “use-it-or-lose-it” clauses are prohibited. The employer must include the monetary value of all unused time in the final paycheck. This payout applies whether the employee resigned voluntarily or was terminated.
States Where Policy Dictates Payout
In a second group of states, the law does not automatically define PTO as earned wages, but the employer is legally bound to follow its own established, written policy. States such as New York, New Mexico, and New Hampshire operate under this principle. If the company’s employee handbook or contract promises a payout of unused PTO, the employer must adhere to that promise. If the policy explicitly states that accrued PTO will be forfeited upon separation, the employer is not required to pay it out, provided the policy is clear and communicated to employees. The written company document becomes the enforceable contract for the benefit.
States That Do Not Mandate PTO Payout
The third category consists of states that have no law requiring the payout of unused PTO upon an employee’s separation. In these jurisdictions, which include Alabama, Florida, and Mississippi, the employer has flexibility in determining how to handle accrued time. If the company policy is silent or explicitly states that unused PTO will be forfeited at termination, the employer has no legal obligation to pay the balance. For an employee in these states, the only way to guarantee payment for accrued time is to use it before the final day, or for the company’s policy to voluntarily promise a payout.
How Company Policy Impacts Your Rights
The employee handbook or internal PTO policy works in concert with state law to define your rights regarding time off benefits. Employees should look for specific language differentiating between PTO that is “accrued” (earned incrementally over pay periods) versus time that is “granted” upfront. Accrued time often strengthens the argument that it is a form of earned wage.
Policies detail the rules surrounding forfeiture, often through “use-it-or-lose-it” clauses, which require employees to use PTO by a specific date. While some states prohibit these clauses, they are permissible in many others and can apply during separation. The policy should also specify any conditions for payout, such as requirements for giving minimum notice or restrictions if an employee is terminated for cause. Understanding the exact wording of the policy establishes the specific framework for the benefit in your workplace.
Practical Steps Before and After Giving Notice
Before submitting a resignation, employees should review the company’s employee handbook, paying close attention to the PTO and separation policies. This review should include calculating the current accrued PTO balance. Knowing the policy and your balance allows for a strategic submission of time-off requests or preparation for a final payout.
A formal request to use time off during the notice period should be submitted in writing to create a clear paper trail. If the company denies the request, the employee must confirm the company’s plan for a final payout, referencing the specific state law or company policy that dictates the payment obligation. If an employer in a state that mandates payout fails to include the accrued PTO in the final paycheck, the employee’s recourse is typically to file a wage claim with the state Department of Labor.