John Phillips at The Word on Employment Law posted about the “Electronic Leash” and cites to a Wall Street Journal post by Sue Shellenbarger that conjures up visions of 1850 sweatshops with following description of employer’s exploitive electronic monitoring of home workers:

In a budding trend some employment experts say is invasive, companies are stepping up electronic monitoring and oversight of tens of thousands of home-based independent contractors. They’re taking photos of workers’ computer screens at random, counting keystrokes and mouse clicks and snapping photos of them at their computers. They’re plying sophisticated technology to instantaneously detect anger, raised voices or children crying in the background on workers’ home-office calls. Others are using Darwinian routing systems that keep calls coming so fast workers have no time to go to the bathroom.

The Home Shoring business proponents put a different spin on the work environment tauting flexibility for workers and accountability for businesses using their services. Although I have never worked in a call center, my interaction with employers that have them shows me that they are highly structured work environments where productivity is closely monitored. Many employees who do not work at home are subject to some of the same types of electronic monitoring that seems objectionable to home workers. Maybe this begs the question, but why should the home-work environment be any less supervised than the at-work environment?

Employer’s biggest concern for at home workers is the lack of supervision. Many advocates of working at home know it has limitations. Teleworking is not for everyone. As noted by Brittany Maling at HR World, it requires self-disciplined and efficient workers who are most successful if their home office mimicks the traits of the traditional work environment. Perhaps the future of telecommuting has reached its tipping point, but there are still many issues to be worked out including the proper balance between mistrust and obsessive monitoring.

From a legal perspective, the degree of electronic supervision directed toward an independent contractor will likely result in a recharacterization of the relationship to one of employee/employer.   We have previously outlined the other legal issues in Legal issues in Telecommuting: Gas Prices make Businesses Reconsider Policies.

On July 22, 2008, the EEOC issued a new section of its Compliance Manual addressing the subject of religious discrimination. The section "provides guidance and instructions for investigating and analyzing charges alleging discrimination based on religion." The new section does not change a Pennsylvania employer’s legal obligations, imposed by Title VII of the Civil Rights Act of 1964 ("Title VII") and the Pennsylvania Human Relations Act ("PHRA"), as amended, with respect to religious discrimination and accommodation. It does, however, provide a handy reference tool for many religious discrimination issues and offer some insight into the EEOC’s current thinking on this often difficult subject. 

As a protected trait under both Title VII and the PHRA, religion may form the basis of disparate treatment, harassment, retaliation, and failure to accommodate claims by applicants and employees. The EEOC’s new section is divided into five sections reflecting the different types of possible religion discrimination claims:

  • Coverage issues, including the definition of "religion" and "sincerely held," the religious organization exception, and the ministerial exception.
  • Disparate treatment analysis of employment decisions based on religion, including recruitment, hiring, promotion, discipline, and compensation, as well as differential treatment with respect to religious expression; customer preference; security requirements; and bona fide occupational qualifications.
  • Harassment analysis, including religious belief or practice as a condition of employment or advancement, hostile work environment, and employer liability issues.
  • Reasonable accommodation analysis, including notice of the conflict between religion and work, scope of the accommodation requirement and undue hardship defense, and common methods of accommodation.
  • Related forms of discrimination, including discrimination based on national origin, race, or color, as well as retaliation.

In addition to the standard harassment, disparate treatment, and retaliation requirements, the EEOC continues to recognize and enforce the following employer obligations:

  • Reasonable Accommodation. Once on notice, an employer must reasonably accommodate an employee whose sincerely held religious belief, practice, or observance conflicts with a work requirement, unless providing the accommodation would create an undue hardship. A reasonable religious accommodation can be any adjustment to the work environment or requirement that will allow the employee to practice his religion. Examples of such accommodations may include allowing flexible scheduling, voluntary substitutions or swaps, job reassignments and lateral transfers, and modification of grooming requirements and other workplace practices and rules.
  • Undue Hardship. An employer need not accommodate an employee’s religious beliefs and/or practices if doing so would impose an undue hardship on the employers’ legitimate business interests. The undue hardship defense to providing religious accommodation requires a showing that the proposed accommodation in a particular case poses a “more than de minimis” cost or burden. This standard is far lower than that required for an undue hardship under the ADA, which is defined in that statute as “significant difficulty or expense."
  • Religious Expression and Participation. Employers must permit employees to engage in religious expression, unless the religious expression would impose an undue hardship on the employer. Generally, an employer may not place more restrictions on religious expression than on other forms of expression that have a comparable effect on workplace efficiency. Likewise, employees cannot be forced to participate, or not participate, in a religious activity as a condition of employment.

In addition to a description of the applicable legal requirements, the EEOC’s new Compliance Manual section on religious discrimination also contains questions-and-answers and "best practices" information designed to assist employers with their compliance obligations. 

The issuance of this new compliance assistance demonstrates that the EEOC remains focused on religious discrimination and accommodation issues. For this reason and numerous others, employers also should be aware of and compliant with these requirements.

A Federal Appeals Court in Philadelphia enjoined Temple University from enforcing its “facially overbroad” sexual harassment policy because some speech that creates a “hostile or offensive environment” may be protected speech under the First Amendment. In DeJohn v. Temple University, the Third Circuit Court of Appeals invalidated a public university’s Policy on Sexual Harassment that reads like that of many private employer’s, finding fault with the italicized language:

For all individuals who are part of the Temple community, all forms of sexual harassment are prohibited, including the following: an unwelcome sexual advance, request for sexual favors,  or other expressive, visual or physical conduct of a sexual or gender-motivated nature when… (c ) such conduct has the purpose and effect of unreasonably interfering with an individual’s work, educational performance, or status; or (d) such conduct has the purpose or effect of creating an intimidating, hostile or offensive environment.

The court found three areas of the policy language that were overboard so as to potentially stifle protected free speech:

  • The phrase “gender-motivated nature” is too indefinite taking into account the speaker’s motivations not limiting only the affect of speech and possibly inhibiting expression of a broad range of social issues. The Court also cautioned that “we must be aware that ‘gender’ to some people, is a fluid concept.”
  • The phrase “conduct which has the purpose and effect of unreasonably interfering” is too broad as it prohibits speech that “intends” to cause disruption. The university may only prohibited speeches that it reasonably believes will actually and materially disrupt the learning environment. (Interestingly, the “purpose and effect” language used by the EEOC.)
  • The phrase “unreasonably interfere[s] with an individual’s work” is too restrictive because it may encompass speech that creates a hostile or offensive environment but is protected nonetheless. A policy may prohibit speech that “substantially” interferes by using an additional standard like “severe and pervasive.”

Many employees in the private sector believe they have a constitutional right to say whatever they want in the workplace.  This is not the case and employees in the private sector may be disciplined for violating workplace conduct standards.

Private employers are not subject to the free speech protections of the First Amendment.  They can also take solace in the fact that a federal court is less likely to wordsmith their employment policies. The case shows the difficulty that all employers face in regulating workplace speech and conduct.  There are obvious challenges in drafting a harassment policy that is not so replete with legalese that is becomes incomprehensible to the workforce.

Hard economic times, perpetual threat of layoffs, workers stretched too thin could all be contributing to the “increasingly humorous American workplace” according to MSNBC author Eve Tahmincioglu in her post No joke! The workplace needs a good laugh. However, others are pointing to our legal system’s clamp down on “hostile work environments” as the cause of a joyless workplace:

What’s exacerbating the joylessness this recession has spawned, some believe, is decades of joke slap-downs in offices and factories. “The whole issue of political correctness has gone too far when it comes to the criteria for determining an offensive comment,” says Thierry Guedj, workplace psychology expert and professor at Boston University. “If anybody is offended, then it’s offensive. The criteria has become much too personalized. It only takes one person being slightly upset at something for it to become offensive.” It started in the 1980s, he continues, got worse in the 1990s and “has now reached its maximum.”

It is true that more claims of workplace harassment are being filed. The EEOC received 27,112 charges of harassment in 2007, up almost 18% from the prior year. Employer’s settlement payments of $65.6 million for these charges are no laughing matter. From a legal perspective, should employees be worried about injecting humor into the workplace and is an employer’s “joke slap-down” necessary? If your humor doesn’t demean people based on their membership in a protected class, then joke away.

It is the “off-color jokes” and other “humor” related to gender, race, national origin, religion or other protected classifications that can be considered harassment. These types of comments always find their way into allegations of discrimination or harassment when a complaint is filed. However, there is an important distinction between remarks uttered by a supervisor (quid pro quo harassment) verses those spoken by a co-worker (hostile environment harassment).

Potentially discriminatory remarks or jokes spoken by a decision maker are evidence of discriminatory motive in adverse employment decisions as noted by the Supreme Court in Ash v. Tyson Foods. A couple of off-color jokes followed up by a disciplinary suspension may give a discrimination charge some merit. On the other hand, mere utterance of a joke or other inappropriate remarks by a co-worker may not sufficiently affect conditions to create a hostile environment as noted in Meritor Savings Bank v. Vinson.   But that’s your risk.

According to EEOC Policy Guidance, a "hostile environment’ harassment takes a variety of forms, many factors may affect this determination, including: (1) whether the conduct was verbal or physical, or both; (2) how frequently it was repeated; (3) whether the conduct was hostile and patently offensive; (4) whether the alleged harasser was a co-worker or a supervisor; (5) whether the others joined in perpetrating the harassment; and (6) whether the harassment was directed at more than one individual. 

Severity and the pervasiveness of alleged hostile activities are the focus of the legal analysis. This is a very fact sensitive inquiry which depends in part on what a reasonable person would find offensive. For example, the New Jersey Supreme Court has held that some racial slurs and jokes are so historically offensive that their use in the workplace, even once, can lead to liability for an employer who doesn’t respond appropriately. A single utterance of an epithet can create a hostile work environment if it is viewed as “severe” and it is aimed at the individual rather than a generalized comment.  

Professor Guedj is correct that workplace humor has changed; but, perhaps the change was needed.  The impact of hypersensitivity is theoretically mitigated by the reasonable person standard.  However, the gray of the law may have led some workplace humorist to abstinence. Alternatively, practicing “safe humor” could include the following prophylactic measures:

  • Evaluate the content of the humor; some words and subjects are never appropriate for the workplace.
  • Know your audience.
  • Save your stand up routine for the comedy club where patrons are willing participants.
  • Don’t make jokes personal by singling out one individual as the butt of your humor.
  • Stop joking with people who seem uncomfortable with it.
  • Don’t ridicule co-workers who don’t like your humor
  • Try ask whether someone is offended by the humor.
  • If a co-worker’s joke offends you, then say something to the jokester.
  • Don’t e-mail jokes to everyone in the office.
  • Take seriously complaints about inappropriate humor, but remember the conduct must offend a reasonable person.

 

The prevalence of e-mail and texting communications can aid an employer in its investigation of workplace misconduct; provided, the employer’s policy adequately preserves its right to access the data. However, overstepping rights to access e-mail and other electronic communication media can result in criminal prosecution under state and federal law.

Recent high profile firings of Philadelphia TV anchors highlight the role of electronic evidence in an employer’s investigations and the pitfalls of illegal access to private computer data, in this case by an employee. Fired TV newscaster Larry Mendte was charged July 21, 2008 with hacking into the e-mail of his younger co-anchor. Mendte was previously fired based on an independent investigation by CBS as he allegedly hacked into Lane’s e-mail account from work and home and then revealed information to news outlets about Lane’s legal troubles. Lane was fired in January by CBS after she was accused of assaulting a New York City Police Officer and other public gaffes which gained media attention. Lane since sued KYW-TV, claiming that the station exploited her, tore her down and defamed her on her way out the door. She also claims that KYW management failed to investigate leaks of personal information about her and also engaged in a pattern of "deep-seated gender-discriminatory animus" toward her and other female employees.  Undoubtedly, CBS’s investigation into the circumstances of both firings will be the critical issues in subsequent lawsuits.

Federal and State laws protect employers and employees from unauthorized access to computers, servers and electronic data. There may be additional limitations on an employer’s access to employee e-mails and text messages sent from employer accounts when the messages are stored on third party provider’s servers and are not stored on employer’s internal network. In Quon v. Arch Wireless Operating Co. Inc., a federal appeals court in California held that a public employer cannot access the content of text messages and e-mails sent at work because the data was stored on a third party service provider’s server and the employees had a reasonable expectation of privacy in these accounts. An employer’s e-mail policy may eliminate the expectation of privacy as to e-mails stored on its servers.  However, the text messages held by “remote computing service” are protected under the Stored Communications Act and cannot be obtained by an employer without the employee’s consent.

Employers must carefully draft policies related to employee use and access to all electronic media so as to preserve its property interest in the data, ensure rights to unfettered access and prevent misuse of the media and information.

It’s no secret that the FLSA is anachronistic, but now it’s ruining the planet too. The 40-hour week divided into 5 consecutive workdays is a product of the FLSA, which was enacted in 1938. During the last 70 years, we have been consuming energy by commuting to work and operating facilities all the while pumping green house gasses into the atmosphere for an extra day a week.

Aaron Newton makes this brilliant observation in his post on The 4 Day Work Week:

The notion of our standard work week here in America has remained largely the same since 1938. That was the year the Fair Labor Standards Act was passed, standardizing the eight hour work day and the 40 hour work week. Each Monday, Tuesday, Wednesday, Thursday and Friday workers all over the country wake up, get dressed, eat breakfast and go to work. But the notion that the majority of the workforce should keep these hours is based on nothing more than an idea put forth but the Federal government almost 70 years ago. To be sure it was an improvement in the lives of many Americans who were at the time forced to work 10+ hours a day, sometimes 6 days of the week. So a 40 hour work week was seen as an upgrade in the lives of many of U.S. citizens. 8 is a nice round number; one third of each 24 hour day. In theory it leaves 8 hours for sleep and 8 hours for other activities like eating, bathing, raising children and enjoying life. But the notion that we should work for 5 of these days in a row before taking 2 for ourselves is, as best I can tell, rather arbitrary.

Mr. Newton then goes on to offer Sixteen Reason Why this is an Idea Whose Time has Come. This post is a “must read” for HR Professionals whose businesses may be evaluating the 4-day workweek option and looking for supporting reasons. The key downsides to the four-day week are losses in employee productivity and customer service. Comments challenging the 4-day workweek appear at the Oil Drum, which reprinted Newton’s post.

We have also outlined some legal limitations on the four-day concept in previous posts as it continues to garner a lot of media attention:

Four-Day Work Week Wave is Coming and Energy Expenses And Gas Prices Motivate Employers To Move To Four Day Workweek: What Are The Legal Issues?

 http://www.msnbc.msn.com/id/22425001/vp/25573627#25573627

Most Pennsylvania employers and their counsel are familiar with the overtime compensation requirements and the exemptions from these requirements established by the federal Fair Labor Standards Act ("FLSA"). The exemptions, such as the bona fide executive, professional, and administrative employee exemptions, define when employers may lawfully treat certain employees as exempt from the FLSA’s overtime compensation requirements. 

Fewer Pennsylvania employers are aware that the Pennsylvania Minimum Wage Act of 1968 ("PMWA"), a state law, also creates a statutory right to overtime compensation and, like the FLSA, includes exemptions to these requirements. At one time, the state overtime requirements and exemptions generally mirrored the FLSA. More recently, however, the federal and state rules on overtime compensation and exempt status have diverged in numerous areas. Compliance with the FLSA requirements no longer ensures compliance with the state PMWA.

For example, the federal Small Business Job Protection Act of 1996 codified prior U.S. Department of Labor interpretations and included an exemption for computer employees. To qualify for the computer professional exemption, the employee must be employed as a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field and must have a primary duty of

(a)             the application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications;

(b)             the design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;

(c)             the design, documentation, testing, creation, or modification of computer programs related to machine operating systems; or

(d)            a combination of the aforementioned duties, the performance of which requires the same level of skills.

The PMWA and its regulations contain no companion to the federal computer professional exemption. Thus, an otherwise exempt computer professional still may be entitled to overtime compensation under the state law. If an employer has a computer professional that meets the federal exemption, the employer should examine whether the employee also qualifies for another white-collar exemption, such as the administrative or professional exemption, that also is recognized by state law. However, Pennsylvania’s white-collar exemptions require that the exempt employee be paid on a Salary Basis; while the federal computer employee exemption allows for payment on an hourly basis if the rate exceeds $27.63 per hour. If the employee in question would not qualify for any other exemption, the employer may be liable for unpaid overtime compensation under the PMWA.

Please note that, even under federal law, "help desk" employees often do not meet the computer professional exemption or any of the other white-collar overtime exemptions

As the effective date of Pennsylvania’s Clean Indoor Air Act approaches, businesses may wish to seize the opportunity to create a comprehensive tobacco-free workplace program including wellness initiatives. The no smoking law applies to all indoor work areas and permits an employer to completely prohibit smoking on its property. However, legal and employee relations considerations suggest an integrated approach to workplace smoking.

Smoking-related business cost are well documented. The Center for Disease Control has the following statistics on smoking:

  • For 1997–2001, cigarette smoking was estimated to be responsible for $167 billion in annual health-related economic losses in the United States ($75 billion in direct medical costs, and $92 billion in lost productivity), or about $3,561 per adult smoker.
  • An estimated, 20.8% of all adults (45.3 million people) smoke cigarettes in the United States.
  • Among current U.S. adult smokers, 70% report that they want to quit completely. In 2006, an estimated 19.2 million (44.2%) adult smokers had stopped smoking for at least 1 day during the preceding 12 months because they were trying to quit.

Design of an effective wellness program to address smoking can take many forms and requires collaboration between insurance brokers, benefit providers and legal advisors in light of limitations placed on certain aspects of their design including HIPAA’s Nondiscrimination Requirements.    HIPAA regulations affect the design of wellness programs that take into account "health factors" when providing incentives under the program. Programs such as the following that do not take into account a participant’s health factors when a reward is given or withheld for participation by an employee or beneficiary:

  • Health Assessments
  • Diagnostic testing that does not take into account test results
  • Preventive care encouragement incentives such as waivers of co-pays or deductibles
  • Smoking cessation programs so long as the benefit is received regardless of whether the employee quits smoking
  • Health education seminars
  • Gym membership reimbursement

Wellness programs that give rewards for healthy conduct or that penalize unhealthy activities (like smoking) must meet all of the five following standards:

  • Limited Reward:       All rewards offered under the program must not exceed 20% of the cost of coverage (total amount of employee and employer contribution). The reward can be in the form of a discount or rebate of premium or contribution; waiver of deductible, copayment or coinsurance; or the value of a benefit provided under the plan.
  • Reasonably Designed to Promote Health or Prevent Disease:    The plan must have a reasonable chance of improving health or preventing disease in a way that is not overly burdensome.
  • No More that Annual Qualification for Award:    Individuals eligible to participate must be given the opportunity to qualify at least once a year.
  • Uniform Reward Availability for "Similarly Situated" Individuals: The reward must be available to all similarly situated individuals and there must be a reasonable alternative for receiving the reward for any individual for whom it is unreasonably difficult due to a medical condition or for whom it is medically inadvisable to attempt to obtain the applicable standard. Physician verification may be required.
  • Plan Material must Describe all Terms:     The plan must describe all terms of the program and the availability of a reasonable alternative. The following language may be used to satisfy the alternative:

"If it is unreasonably difficult due to a medical condition for you to achieve the standards for the reward under this program, or if it is medically inadvisable for you to attempt to achieve the standards for the reward under this program, call us at            and we will work with you to develop another way to qualify for the reward."

Business initiatives to regulate off duty conduct have some legal risk. However, courts have so far rejected smoker’s claims of disability based upon nicotine addiction.

Most hiring decisions are predicated in some part on subjective criteria. Let’s take for example, “Attitude and communication skills” which are on the top the hiring criteria for Phil Gerbyshak at Slacker Manager’s based on his post 5 Must Have Skills. Undoubtedly these traits were assessed by one or more members of the Phil’s hiring team based on how the candidates presented themselves at the interview. This hiring approach is universally practiced by companies across the country and loathed by government enforcement agencies.

The EEOC and OFCCP have initiatives targeting an employer’s selection process. The EEOC announced its focus on employment testing and screening resulting in a fact sheet Employment Tests and Selection Procedures. Likewise, OFCCP has a program targeting Systemic Discrimination, which examines criteria used in the hiring process. Subjective criteria are scrutinized because of the fear that they will be manipulated for a discriminatory purpose.

Courts examining subjective hiring criteria have not outright prohibited their use, but have cautioned against their advancement because they are “easily fabricated”. Recently in Wingate v. Gage County School District, the Eighth Circuit Court of Appeals ruled that an employer’s use of subjective criteria did not create an inference of age discrimination when objective criteria were also utilized to make the employment decision.

The legal analyses of subjective hiring criteria revolve around theories of disparate treatment or disparate impact. The measure of compliance has its origin in the Uniform Guidelines on Employee Selection Procedures, which define interview questions as means of selection criteria and set forth the parameters for compliance.

The legal compliance for disparate treatment focuses on the following:

  • Whether the subjective criteria are job related
  • How they are measured
  • Whether the criteria are uniformly applied

According to Section 30 the OFCCP Compliance Manual, employers that utilize subjective hiring criteria will be evaluated for disparate treatment based, in part, upon their use of “safeguards” in the hiring process:

Safeguards consist of efforts made by the contractor to limit the possibility of differential application of the selection criteria/processes. In other words, treating members of a minority group or women differently than others in the application/evaluation of the criteria/processes. An example of a uniformly applied subjective process with safeguards could be an interview where all persons who pass the required test are interviewed regardless of minority or sex status; all interviewers are professionally trained in interviewing; all persons interviewed are asked the same questions; responses are documented; and answers are all evaluated in the same manner.

The legal compliance hurdles for disparate impact have a slightly different focus. The EEOC describes this process as follows:

  • If the selection procedure has a disparate impact based on race, color, religion, sex, or national origin, can the employer show that the selection procedure is job-related and consistent with business necessity? An employer can meet this standard by showing that it is necessary to the safe and efficient performance of the job. The challenged policy or practice should therefore be associated with the skills needed to perform the job successfully. In contrast to a general measurement of applicants’ or employees’ skills, the challenged policy or practice must evaluate an individual’s skills as related to the particular job in question.
  • f the employer shows that the selection procedure is job-related and consistent with business necessity, can the person challenging the selection procedure demonstrate that there is a less discriminatory alternative available? For example, is another test available that would be equally effective in predicting job performance but would not disproportionately exclude the protected group?

Employers who want to assess attitude and communication skills should consider the following additions to their hiring procedures:

  • Make attitude and communication skills an express criteria in job descriptions and summaries of minimum job requirements
  • Describe its job relatedness and business justification
  • Assess whether the criteria is creating an adverse impact
  • Implement “safeguards” in the hiring process describe in OFCCP Guidance

Traditional leave programs segregate time off into categories like vacation, sick time and personal time requiring HR professionals to track both the time off and the reason it is being taken. Sick time abuses are addressed by tightly monitoring the reasons for sickness-related absences and disciplining employees for excessive absenteeism. Many employers have decided to get away from policing the circumstances of an employee’s absence by just creating a bank of paid time off that can be used for any reason. Once PTO is exhausted, time off is unpaid and subject to the attendance discipline policy. This certainly sounds like a great idea, but here are some practical and legal considerations in converting from a traditional sick pay program to a PTO plan:

Timing the Change Over to PTO:

Changes in leave policies should be coordinated with either the end of the leave year period or some other workplace change like moving to a four-day workweek. The obvious choice is converting to PTO bank at the end of the year, since most employers administer their time off programs on a calendar/fiscal year. For employers using anniversary date leave years, it is too difficult administratively to run dual programs, so they should pick a date and change over for everyone.

Effect on Four-Day Workweeks

Employers need to remember that a change in workweek from five eight days to four day ten hour days also affects time off policies. A handbook or CBA may describe time off (PTO, vacation, holidays, personal and sick time) in terms of “days”. However,

a workday, which used to be an 8-hour day, is now a 10-hour day. The 8-hour day was 20% or the workweek, but the 10-hour-workday is 25% of the workweek. If a day expands to 10 hours, employees are getting more time off and, as a result, the company is losing 5% productivity. If a day stays at 8 hours then employees can’t cover the whole day off. Converting the whole PTO bank to hours can address this situation. (see Energy Expenses And Gas Prices Motivate Employers To Move To Four Day Workweek: What Are The Legal Issues?)

Addressing the Perception of a "Take Away":

Converting to PTO means combining vacation, sick days, personal days, and other time off into one bank. Employers almost never credit the entire amount of sick time to PTO banks. Therefore, employers need to address the perception that employees are losing sick time. I have found that referring to the statistic mentioned in the prior posting (average 8 sick days, use 5) makes some sense. Based on this ratio, I convert 60% of sick days to PTO and couple it with an explanation about trade offs.

Dealing with Accumulated Sick Time:

Some employers allow the accumulation of unused sick time as an incentive not to use it. (This practice drives accountants crazy). The accumulated time may be used in some of the following ways: to satisfy a waiting period for STD/LTD; as a pay out upon separation, typically at a reduced percentage (50%); or it is simply forfeited. Employers may seize the opportunity to clean up their balance sheet and pay out a portion of the accumulated time or convert it to PTO. This approach softens the blow of the perceived take away mentioned above. However, an employer’s flexibility in dealing with accumulated sick time depends on its written policy and practice with regard to payouts. Be careful not to create a claim for unpaid fringe benefits under the Pennsylvania Wage Payment and Collection Law.

Exhausting PTO:

Employees who use all of their PTO are unpaid for additional absences and are subject to discipline under the attendance policy. Some traps for the unwary include: the prohibition on salary docking for exempt employees; additional unpaid leave as an accommodation under the ADA, and discrimination claims under the ADA.

Administering FMLA:

FMLA administration becomes more challenging in a PTO program since the employer is not necessarily aware of the reason for an absence. A serious health condition under the FMLA triggers an obligation to notify an employee of his or her FMLA rights and starts the counting of the time against the 12 weeks of leave. Employers must also address the concurrent use of PTO and FMLA leave in their policies.

Integrating STD and other Leave Programs:

Some sick leave policies were designed to integrate with the waiting period for STD benefits. A move to PTO creates a disconnect. The disconnect can be mitigated by allowing an employee with accumulated sick time to use it to satisfy the waiting period if he or she becomes eligible for STD benefits. Otherwise, PTO or unpaid time is used during the waiting period. Employers might address hardships by creating a PTO donation program where employees may donate unused PTO to a fellow worker who needs additional time.

Contesting Unemployment Claims:

 An employer’s proof of willful misconduct to deny unemployment benefits will generally look at the incident that gave rise to the discharge. If the reason is a violation of employer’s attendance policy, the employee can show that the violation was not his or her fault. An employee who is fired for excessive absences after "squandering" PTO, may still be eligible for unemployment if the absence that gave rise to termination was for a legitimate illness.

Drafting a Policy:

A written policy on PTO is strongly suggested and it should address at least the following areas:

  • Accrual Basis or Award Basis
  • Notice of Absence
  • Unused PTO carryover or forfeiture
  • Concurrent use of FMLA and PTO
  • Consequences of Exhausting PTO
  • Discipline/Discharge