Are You Required to Pay Out or Roll Over Unused PTO?

Paul Edwards


Every year about this time, I get asked by at least a dozen dentists how they’re legally required to handle unused employee paid time off (PTO). Must you roll it over or pay it out? If an employee quits or is terminated, can you declare the PTO forfeit? Depending on where your practice is located, you may have different options and obligations that impact your PTO policy.

There are two things to consider here: legal ramifications and employee/team morale. The morale issue is the same for all employers since it feels unfair, as an employee, to earn PTO and then have it taken away, unused and unpaid.

However, the legal issues vary state by state. In fact, federal law does not require paid time off, so your options depend entirely on what is required by the labor laws for your particular state.

As a New York employer, for instance, you would not be required to provide (paid or unpaid) vacation time. If you did provide PTO, you could choose not to allow rollover, and you could elect not to pay out unused vacation time at termination. But remember, this is just one example. Many other states work differently!

Before taking action on a current issue, examine any PTO policies you already have in place and understand how they relate to your state law requirements. In New York, if you have not given employees written notice of forfeiture and the conditions that govern it, paid vacation must be paid out.

Also, PTO aside, remember that an increasing number of states and even cities now require many employers to provide paid or unpaid sick time. Most New York City employers, for example, also face specific requirements for providing and rolling over paid sick time.

You can see how this can get complicated fast!

Look closely at your PTO policies. Whatever your state, your policy language should be explicit and detailed. You will need to abide by your own written or implied promises regarding vacation time. If a dispute arises, or after a termination, anything left unclear or unaddressed will be ruled in your employee’s favor.

If your employee handbook does not specifically discuss eligibility, how time is earned or accrued, and how time may or may not be rolled over (or how only a percentage can roll over), or if it has any other irregularities, I would err on the side of paying for unused time this year. I would then get expert help rewriting all relevant sections of your employee handbook so you know your policies are comprehensive, up to date, and legally compliant. That way, next year you’re set.

Make sure to have a detailed discussion with that expert while he or she is crafting policies such as this one for you. Your PTO policies must comply with all laws that apply in your state to businesses of your size, and they should be tailored to the individual needs of your practice within the bounds of those laws. Finally, you need to understand what your policies do—and when you put them in place, you’ll need to have your employees sign to acknowledge that they understand them, too.

Paul Edwards is the CEO and cofounder of CEDR Solutions. Since 2006, CEDR has been the nation’s leading provider of individually customized dental employee handbooks and HR solutions, helping dentists successfully handle employee issues and safely navigate the complex and ever-changing employment law landscape. For more information or a free employee handbook evaluation, visit


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