Knowing when employee time off is required to be paid or unpaid can be complex, especially for small businesses. Understanding federal and state laws helps employers comply with the law while managing employee leave.
At the federal level, there is no requirement for paid leave in the United States. The Family and Medical Leave Act (FMLA) is the primary federal requirement for unpaid time off. It requires employers to provide 12 weeks of leave in a 12-month period for bonding with a newborn child, serious health conditions for the employee, or caring for a sick family member.
For small businesses, a key distinction in the FMLA is the 50-employee threshold. The FMLA provision applies only to private sector employers with 50 or more employees within 75 miles during the current or preceding calendar year. Businesses under this threshold are exempt from these requirements.
At the state level, thirteen states and the District of Columbia have laws requiring paid leave for family and medical reasons: California, Colorado, Connecticut, Delaware, Maine, Massachusetts, Maryland, Minnesota, New Jersey, New York, Oregon, Rhode Island, and Washington. Ten additional states have voluntary systems through private insurance.
It is important that small businesses research their state regulations. States often match the FMLA maximum of 12 weeks but may not distinguish between small and large businesses. For example, Washington, Oregon and Colorado have separate requirements and grant programs based on business size. Some states also have differing contribution rates depending on employee numbers.
Additionally, there are laws requiring employers to provide paid sick leave in 18 states and the District of Columbia. These laws typically require up to around 50 hours of paid sick leave intended for shorter periods of routine illness.
More information on state laws can be found on the U.S. Department of Labor website.
Small businesses should also consider policies regarding carryover and payout of accrued paid time off (PTO). Each state has its own requirements regarding PTO carryover limits and whether employees need to be compensated for unused PTO upon termination.
Best practices suggest that small businesses investigate their state requirements carefully. They should record how much leave each employee has accrued and set necessary carryover limits to avoid confusion or legal issues when formulating employee policies.
For questions about paid leave issues or concerns related to compliance with these regulations "the NFIB Legal Center is here to help." Contact them at info@nfib.org.
