Substitution of paid leave

This is the last one from Malania. If I want to keep doing this I’m actually going to have to start writing these things again. Bummer.

Back again, for yet another thrilling discussion of FMLA-related leave. Are you sick of me yet? I’m sick of me. But stay tuned for a topic I think you’ll find quite useful. You see, some of you may be so lucky to work at a company that allows employees to accrue paid leave benefits, sometimes referred to as sick leave. But when, if ever, does the employee have to use this paid leave they’ve worked to save up? Turns out:

If an employee does not choose to substitute accrued paid leave, the employer may require the employee to substitute accrued paid leave for unpaid FMLA leave.

29 CFR §825.207(a) (emphasis added).

So there you have it: a seemingly straightforward answer (for once). But let’s break this down just a little bit more before we throw in the towel, starting with the definition of “substitute.” Substitute here means that an employee’s paid leave will run concurrently with their unpaid FMLA leave: i.e. the employee will get paid for a portion of their FMLA leave, with the exact portion dependent on how many accrued paid leave days the employee has socked away.

Alright, that doesn’t sound so difficult. But you may now be wondering, when, if ever, can the employee choose not to take their paid leave? Because by this point, you’re certainly smart enough to know that there’s a legal hurdle, caveat, exception, etcetera, just waiting around the corner . . . .

So let’s look at that next. The first hurdle in determining when the employee can or must substitute paid leave for FMLA leave is figuring out whether the employee qualifies to take the paid leave in the first place:

An employee’s ability to substitute accrued paid leave is determined by the terms and conditions of the employer’s normal leave policy.

29 CFR §825.207(a).

This means that if the employee doesn’t meet the company’s criteria for using their paid accrued leave, the employee does not need to take it. But, in order to determine whether or not the employee can take it in the first place, you, as the employer, are required to:

[I]nform the employee that the employee must satisfy any procedural requirements of the paid leave policy only in connection with the receipt of such payment. If an employee does not comply with the additional requirements in an employer’s paid leave policy, the employee is not entitled to substitute accrued paid leave, but the employee remains entitled to take unpaid FMLA leave.

29 CFR §825.207(a).

Slightly convoluted, but the takeaway here is this: if the employee is told that they need to do something additional in order to use their paid leave and they don’t do it, the employee can still choose to take FMLA leave (assuming that the employee qualifies for it). Additionally:

If neither the employee nor the employer elects to substitute paid leave for unpaid FMLA leave under the above conditions and circumstances, the employee will remain entitled to all the paid leave which is earned or accrued under the terms of the employer’s plan.

29 CFR §825.207(b).

Essentially, if your employee has accrued paid leave, you cannot take that leave away from your employee merely because they could have used it and chose not to. Conversely, if your employee did not qualify for FMLA leave and took paid time off instead, that wouldn’t count against the employee’s future entitlement to FMLA. I think for most of you know that will logically make sense: how could you take away someone’s FMLA leave entitlement if they didn’t qualify for it in the first place? But I digress.

Let’s end this discussion by examining two other scenarios that might come into play and make this calculus a bit more daunting: disability leave and worker’s compensation.

We’ll tackle the disability leave first. The biggest takeaway here is that leave taken due to a disability may be designated by the employer as FMLA leave if it meets all of the necessary criteria. However,

(d) Because leave pursuant to a disability benefit plan is not unpaid, the provision for  substitution of the employee’s accrued paid leave is inapplicable, and neither the employee nor the employer may require the substitution of paid leave.

29 CFR §825.207(d).

Basically, the employee and the employer can agree to use some of the employee’s paid leave during this time if, for instance, the disability benefits do not fully cover the employee’s salary. But neither the employee nor the employer can require the use of the paid leave. Lucky for you (since I suspect you’re pretty tired of reading this by now), it’s more or less the same story with worker’s compensation: neither the employee nor the employer can require the use of paid leave, but the parties can agree to have the employee use the paid leave if the worker’s compensation doesn’t cover the employee’s full salary.