Davis Brown Employment and Labor Law Blog

Employee Staycation - PTO Policies in the Age of COVID-19 - August 18, 2020

Kacy L Flaherty-Tarpey

Throughout 2020, employers have faced uncertainty and challenges due to the COVID-19 pandemic. While employers should prepare to adapt to any changes the pandemic presents, there are additional challenges that will arise including employees using paid time off (PTO).


Just as they were back in March, employees continue to cancel trips and vacations to avoid the spread of COVID-19 and PTO is going unused by many employees. The current state of the pandemic in the United States does not indicate that vacation as usual will resume in the months remaining in 2020. However, this unused PTO could result in issues for employers at the end of 2020 and even into 2021.


Managing the Flood

As a discretionary benefit, PTO in Iowa is governed primarily by any published policy of an employer that complies with Iowa Code 91A. Iowa employers’ policies control how PTO is accrued and used. As a result, employers must look to their policies to prepare for specific issues that may arise from the pandemic including a flood of end of year requests.


Employers can set rules in their PTO policy and can modify the policy to take into consideration pandemic and post-pandemic business needs. If employers decide to make modifications to their PTO policy, they should evaluate whether the approval process, pay-out, or “cap” policies should be changed in light of the pandemic.


Preapproval Process            

Pandemic changes could include, for example, updates to the employer’s preapproval process for PTO requests. Employers have the right to limit employee vacation time and can establish whose preapproval is needed for a PTO request. There is no legal rule governing the priority in which employees receive vacation time. This allows employers to establish rules for granting, or not granting, PTO approval.


These determinations may become especially important if employees request time off in droves around the holiday season to make up for lost 2020 time off. Some examples of policy considerations an employer could consider:

  • giving PTO priority to employees who were considered “essential” during the uncertain months of the pandemic
  • setting conditional dates for busier times that limit employees from taking PTO
  • incentivizing employees to take PTO before the end of 2020

Though, as a reminder, employers should be careful not to use impermissible and/or discriminatory considerations for denying an employee’s PTO request.


PTO Payouts, Rollovers, and Caps

Employers concerned about managing a flood of time off requests may consider offering employees a pay-out or roll-over of accrued time off. However, a pay-out of accrued, but unused PTO could not only be costly but may also create tax issues.  


Some employers may consider allowing PTO days to roll over into next year to give employees more time to use the accrued time off. This allows employees more time to evaluate when a break is necessary and may alleviate employer stress in evaluating which employees are granted their PTO and which are denied. However, employers should weigh the risks of this decision, as it may cost more if employees leave, depending on the employer’s pay-out policy.


Other options available include implementing a PTO cap that limits PTO accrual or inserts a cap on hours that can carry over into 2021. In Iowa, while it is legal to implement a “use-it-or-lose-it” PTO policy, employers may not take away PTO that has already been accrued. This means that employers must assess their current policies and the effects of those policies to evaluate this option.

Regardless of any potential changes to an employer’s leave policy, employers should continue to gauge whether other laws governing employee leave may apply, such as the Family Medical Leave Act (FMLA) or Families First Coronavirus Response Act (FFCRA).


The Big Picture

Now is the time for a policy change. Given the mental and emotional toll 2020 has taken, it’s likely employers could see more PTO requests around holiday time or into 2021 if these benefits roll-over.


Therefore, it is crucial employers review, and potentially revise, their leave policies before any fallout. Before employers make any of these policy changes, however, employers should weigh the risks and rewards to their businesses and their employees. If employers prepare, they can communicate clear leave policies that meet both employer and employee needs.

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