Multi-State Employees’ Paid Leave Compliance

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Does your nonprofit organization employ workers in multiple states?  If so, multiple legal requirements, such as varied paid vacation and sick leave benefits, may apply according to employees’ work locations.  What should responsible nonprofits do in response?  The following guidance explains some legal considerations and provides follow-up recommendations.

Overall Considerations

As a general rule, an employee is covered by the employment laws of the state in which the employee performs the work.  As the U.S. Supreme Court has instructed, "[a] basic principle of federalism is that each State may make its own reasoned judgment about what conduct is permitted or proscribed within its borders, and each State alone can determine what measure of punishment, if any, to impose on a defendant who acts within its jurisdiction.” State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 422 (2003).

The autonomy of state employment laws can have repercussions for multistate nonprofit organizations because employees working in different states may be entitled to varying vacation or sick-time benefits and related notifications.  Keeping track of and managing compliance obligations in several states is extremely challenging.

Unused Vacation Policies

Although many employers offer paid vacation time as part of their benefits package, they are not required to do so by federal law.  In addition, no federal law requires an employer to pay for unused vacation time when an employee leaves the organization.  Many state laws, however, treat accrued vacation time as compensation owed upon employment termination. 

Employers should set forth clear guidance about paid vacation in their employee handbook, including employee eligibility (e.g., full-time, part-time, length of service prerequisites), method of accrual (e.g., one day per month worked), and any potential forfeiture.  Regarding forfeiture, employers commonly restrict vacation pay accrual to a maximum rollover amount per year (e.g., only up to one week of accrued vacation may be rolled over to a subsequent year).  Note, however, that some states may treat such matters differently, such as in California where employers may cap paid leave at a maximum amount, but do not otherwise restrict vacation leave rollovers.

Paid Sick Leave Policies

No federal law requires employers to give employees paid sick leave.  (Note that the federal Americans with Disabilities Act and the Family Medical Leave Act may mandate allowing leave for employees, but such leave is unpaid unless otherwise provided by the employer.)  Conversely, some state and local laws require employers to provide paid employee benefits.  Currently, four states, nineteen cities, and one county guarantee, or reportedly are planning to guarantee, paid sick leave to employees.  (For a chart outlining state and local sick leave laws as of August 5, 2015, click here.)

For example, a Washington, D.C., law allows employees to take paid sick leave for their own health conditions or the health condition of a family member, including taking time off for routine doctors’ appointments and preventative treatment.  A “family member” includes a child, spouse, parent, or parent of a spouse.  Employees may also take sick leave to address the consequences of domestic violence.  Employees begin accruing sick leave from their hire dates (at a rate dependent on employer size), and can begin using this sick leave after they have worked for the employer for at least 90 days. 

Unlike vacation leave, paid leave typically may be treated by employers on a “use it or lose it” legal basis.  Consequently, employers should specify in their employee handbooks that any accrued sick leave will not result in a monetary benefit upon employment termination.  In addition, employers should address to what extent, if any, accrued sick leave may roll over to future years.

Following Up

To accommodate multi-state employment law requirements, employers should review vacation and sick leave policies to check for legal compliance with all applicable laws for an organization’s workers.  Adjust as needed.

In addition, nonprofits may wish to implement one or more of the following recommended alternatives.

1.         Employers may wish to use one general employee handbook and manage varied legal requirements through addenda or other supplements specific to particular employees’ locations.  While this method may be somewhat time-consuming for management, it will notify employees of legal variations and capture specific employee notification requirements.  This approach may work well with a workforce that shifts among various states. 

2.         Conversely, keep the employee handbook very general.  Under this approach, written policies may state generally that employee benefits shall be provided in compliance with applicable law.  Such vagueness may be frustrating and confusing for employees, however, leading to unwanted misunderstandings and conflict.   This approach is a very low-budget way to bring stated policies into legal compliance, but employers will need to make sure their employment practices are actually compliant. 

3.         As an alternative to options 2 and 3, a nonprofit may adopt uniform policies that are legally compliant under all jurisdictions in which an organization’s employees work.  While this option admittedly will provide greater employee benefits than legally required for some employees, it should ease administrative burdens and create a more cohesive organizational culture.

4.         Similar to option 3 above, create policies that are more generous than legally required.  In other words, go above and beyond.  Employees will appreciate such largesse, and HR administration may be simpler overall.

Employment law compliance is essential for any well-run nonprofit organization, including one with employees in multiple states.  Following up with clear communication to employees about their paid benefits (and other work aspects) should not only promote positive employee morale but also should decrease the risk of adverse employee claims. For more information on other factors to consider when constructing an employee handbook, our friends at FitSmallBusiness have a great resource on the subject here.