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Understanding Unpaid PTO

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Unpaid PTO refers to time off from work that an employee takes without receiving their regular wages during the absence. Employers must establish clear, comprehensive, and consistent PTO policies compliant with federal and state labor laws. These policies should be detailed in the employee handbook and communicated to employees.

What is Paid Time Off (PTO)?  

Paid time off is a workplace policy that allows employees to take time off from work while still receiving their regular wages. Frequent types of PTO include vacation days, sick days, and national holidays. This is different from unpaid time off which occurs when a worker does not get compensation for the missed days. For example, a leave of absence, military leave, or additional vacation beyond paid vacation days. 

Employee Rights and Employer Obligations 

Understanding Your Rights as an Employee 

Understanding your rights as an employee is crucial, especially when it comes to unpaid PTO. Your rights largely depend on your company’s policies and the specific terms outlined in your employment contract. While federal law does not mandate PTO, some states have regulations that could affect how unused PTO is handled upon resignation. North Carolina state law does not regulate PTO payout upon exiting a job. Your employer’s written policies and any promises made in your employment agreement will dictate your entitlements. If your employer’s policies or your contract specify that unused PTO will be paid out upon resignation, they are legally required to honor that agreement. 

Employer Responsibilities 

Employers have significant responsibilities when managing PTO policies, especially concerning the payout of unused PTO upon an employee’s resignation. It is crucial for employers to establish clear, comprehensive, and consistent PTO policies that comply with both federal and state labor laws. These policies should be clearly detailed in the employee handbook, and employees should be made aware of any changes made. In the event of an employee’s resignation, employers are responsible for reviewing the relevant policies and employment agreements to determine if there is an obligation to pay out unused PTO. Additionally, they must keep accurate records of hours worked and wages paid to employees, ensuring transparency and compliance with the law. 

Unpaid PTO After Resignation/Termination 

Unpaid PTO guidelines align with the terms in the employee agreement. In North Carolina, there is no law that requires employers to pay out unused PTO upon an employee’s resignation unless there is a contractual agreement to do so. As for termination, vacation pay accrues as it is earned and cannot be forfeited. Employers must distribute vacation pay at the employee’s final rate of pay unless there is a pre-agreed forfeiture policy. Therefore, it is crucial for employees to review their company’s PTO policy and any additional employment contracts. Employees should be sure to understand their rights prior to leaving their job to avoid any surprises. Consult with an unpaid wages attorney to understand your legal options and ensure you are protecting your rights.  

North Carolina Wage and Hour Act (NCWHA) 

The NCWHA is a state law that governs various aspects of employment, including minimum wage, overtime pay, and record-keeping requirements. The act mandates that employers pay their employees no less than minimum wage along with paying overtime for working over 40 hours. Additionally, the Act includes provisions for wage payment upon termination, detailing that employers must pay all wages due by the next regular payday. This law aims to protect workers’ rights and ensure fair compensation. 

Contact Us 

The Unpaid Wages Attorneys at Maginnis Howard handle various cases regarding wage and hour issues, including unpaid PTO. Our experienced team is here to assist you in getting fair compensation. Maginnis Howard has three offices with locations in Charlotte, Raleigh, and Fayetteville. To reach an intake specialist, visit our contact page or submit an inquiry through our Live Chat feature. You may also call us at (919) 526-0450. We accept clients across the Carolinas.