How Unlimited PTO Works With Other Types of Leave
- Unlimited PTO usually does not replace company holidays. Instead, they’re additive–but this is not always clear to employees.
- A PTO policy that grants unlimited sick leave with no accrual may be non-compliant with state-mandated earned paid sick leave.
- There are three approaches to paid parental leave when you also offer unlimited PTO, each of which has upsides and downsides.
- Unlimited PTO adds even more complexity and headaches to FMLA compliance.
- Employers can get into trouble if their unlimited PTO policy doesn’t specifically exclude short-term disability leave.
Does unlimited PTO mean fewer holidays? Do I still have to call in sick? Does this mean I can take unlimited parental leave? Does unlimited PTO replace disability leave?
These are all real questions we’ve heard people ask about unlimited PTO. The reality of unlimited PTO is already confusing. But things get really tricky when it overlaps with other types of leave, such as holidays, sick time, parental leave, FMLA, and short-term disability.
Unlimited PTO and Holidays
The U.S. government lists 11 federal holidays, and some states give workers additional holidays off. Companies with employees in other countries also need to account for those countries’ holidays. Which holidays you choose as company days off, however, is a tricky subject: giving Christmas but not Hannukah off could be seen as favoring one religion over another, for example.
Some companies get around this by adopting a flexible “floating holiday” system, wherein all employees are granted a certain number of days they can use off for holidays at their own discretion.
Typically, unlimited PTO does not replace company holidays. Instead, they’re additive: employees get those holidays off, without needing to make a PTO request. But this isn’t always clear to employees.
If you’re in HR and switching to unlimited PTO, make sure your employees understand how you’ll approach company holidays. As an employee, a simple message to HR should clear things up.
Unlimited PTO and Sick Leave
States with mandatory paid sick leave also require that employees accrue it with hours worked. Accrual rates are specified in the laws, unless an employer’s policy is more generous than the minimum.
Some companies write their unlimited PTO policy to include both vacation and sick time off. This is easy to understand, and at first glance looks simpler to manage from an HR perspective.
The truth is different.
Lumping vacation and sick time together under the same policy is actually a potentially serious compliance problem. This is because some states that mandate paid sick leave also require that sick time accrues with time worked.
The upshot is that a PTO policy that grants unlimited sick leave with no accrual may be non-compliant. At the very least, it will require careful policy wording and diligent record-keeping.
In order to stay compliant while also offering unlimited PTO, some companies maintain two PTO policies: unlimited for vacation days, and accrual for sick days. This is technically compliant, but undercuts the promise of unlimited PTO for employees.
As an employee, make sure you’ve read your company’s PTO policies in full. They should specify your company’s approach to vacation time versus sick time. If you’re still not sure, ask HR for clarification.
If you’re in HR, make sure your company’s sick time and vacation policies are clear and aligned. Research your state’s sick leave laws, and build your policy around them.
Of course, always be thinking about why you want to offer unlimited PTO in the first place. If you can’t write a policy which achieves that goal while staying compliant, consider another type of PTO policy.
Unlimited PTO and Maternity Leave (Parental Leave)
The interaction between unlimited PTO and parental leave is a tricky, confusing subject. Some companies extend their unlimited PTO policy to parental leave (maternity leave, paternity leave, or both). But most companies maintain separate policies for vacation and parental leave.
Overall, there are three approaches employers take to parental leave when they also offer unlimited PTO: offer no separate parental leave; create a distinct policy for limited-duration parental leave; or give employees unlimited parental leave to mirror their unlimited vacation.
Employee Sentiment at the Intersection of Unlimited PTO and Parental Leave
No Parental Leave + Unlimited PTO
Some Parental Leave + Unlimited PTO
Unlimited Parental Leave + Unlimited PTO
Negative: My employer is hypocritical: I can take unlimited vacations, but they don’t care about helping new parents.
Neutral: My employer cares about parents, but I only get a limited amount of time to bond with my newborn.
Very Positive: My employer really cares about supporting new parents by giving me time with my baby.
Neutral: I don’t have to manage the intersection of PTO and parental leave, but the optics of our policy are impacting hiring and retention.
Positive: Employees like that we support new parents, but tricky cases come up where employees extend their parental leave with PTO.
Negative: Employees love how much freedom we give, but managers complain that it’s impossible to plan and organize their teams.
Option 1: No Parental Leave + Unlimited PTO
One option is to simply offer no maternity or paternity leave, but keep your unlimited policy for vacations.
On the surface, this seems simple. But you'll still need to comply with the federal-level Family Medical Leave Act (and state-level family leave laws like California's CFRA). The intersection of FMLA and unlimited PTO is frightfully complex (keep reading for more on that subject).
Also, this sends a very mixed message to your employees. You're basically telling them they can take as much vacation as they want, but not care for a newborn. This could impact hiring and retention of parents, parents-to-be, and others.
Finally, this arrangement will also lead to PTO management issues, because frustrated parents will likely use your unlimited vacation policy to take time to care for their newborn.
Option 2: Limited Parental Leave + Unlimited PTO
Another option is to have a separate policy for maternity or paternity leave (or both) alongside an unlimited vacation policy.
You could, for example, have one policy that gives new parents 12 weeks of paid parental leave, with the option to extend with unpaid FMLA leave.
In this case, however, employees will probably tap into their unlimited vacation to extend their time with their newborn (this gets a lot of discussion on Reddit). To reject these PTO requests could go against the letter of your policies, and even open the door to a discrimination lawsuit
Option 3: Unlimited Parental Leave + Unlimited PTO
The simplest option is to extend your unlimited PTO policy to cover maternity, paternity, or parental leave as well. This effectively gives your employees free rein to take as much time off as they want to care for and bond with their newborn.
This will doubtless be very popular with new parents. But it could also lead to huge operational and management problems. Managers who don’t know for how long an employee will be absent can't plan and organize their team. For HR, you'll be stuck in a constant limbo of trying to follow up with the employee on their return to work date.
Parental Leave and Unlimited PTO: What to Do
As an employee, read up on your company’s PTO and parental leave policies. If you’re still unclear on what’s allowed (versus what’s acceptable), or when to take one type of leave versus another, talk to your manager or ask your HR department directly.
If you’re an employer with unlimited PTO, be very careful when preparing for and handling cases where it crosses with parental leave. Consider both the legality and the “optics”. Ask yourself: How will your solution look to your employees? Could it impact retention and hiring?
Unlimited PTO and FMLA
An unlimited PTO policy adds even more complexity and headaches to FMLA compliance.
What is FMLA?
The Family and Medical Leave Act (FMLA) is a federal law that gives covered employees the right to take unpaid, job-protected leave for specific reasons related to family and medical events. FMLA applies to all public employers, and private employers who have 50 or more employees. The duration of FMLA leave depends on who is taking leave and the reason.
FMLA serves as a foundation. States have the option to build upon it with their own Paid Family & Medical Leave (PFML) laws. California, for example, expands on FMLA with the California Family Rights Act (CFRA) while Colorado has their Family and Medical Leave Insurance (FAMLI) program. Most recently, Minnesota's legislature passed a PFML law set to take effect in 2026.
U.S. States With Family & Medical Leave Laws
Alaska (state employees only)
Colorado (FAMLI) (benefits begin January 1, 2024)
Delaware (benefits begin January 1, 2026)
Hawaii (unpaid leave, supplements FMLA)
Maryland (benefits begin January 1, 2025)
Minnesota (benefits begin January 1, 2026)
Montana (unpaid leave for pregnancy or maternity, supplements FMLA
New Hampshire (voluntary)
South Carolina (state employees only)
South Dakota (state employees only)
Wisconsin (unpaid, supplements FMLA)
Vermont (voluntary, benefits begin July 2023 for public employees, 2024 for private employees)
New Hampshire and Vermont have voluntary programs for private sector employers and employees who opt in by purchasing coverage (state employees have guaranteed coverage). The difference is that these two states do not guarantee the right to paid leave; they simply provide a voluntary option to purchase insurance coverage.
The intersection between unlimited PTO and FMLA or state-specific family leave is very complex. At best, it’s difficult and time-consuming to manage. At worst, it can quickly become a serious legal risk.
As an HR professional, imagine these scenarios:
An employee needs to take two weeks off to care for a sick family member. It’s an emergency, and they’re under a huge amount of stress. They don’t know about FMLA, so they just submit a request/notification for vacation time. In their mind, your policy says they can take as much time off as they want, so why does the reason matter?
(The reason does matter, of course, but your employee might not know that.)
An employee has been on FMLA leave for a while to care for their newborn. They’re due to return to work, but their child has complications that require more care. They tell you they’re using your unlimited PTO policy to extend their leave. What do you do?
You can probably imagine countless more cases like this. They’re not just niche edge-cases; they can and will come up. When writing an unlimited PTO policy, you must account for them.
In the first example, depending on how you respond, you could easily violate FMLA; create huge management headaches; or even open yourself to a discrimination lawsuit.
This second example is also very tricky. Employment law firm Sebastian Miller writes that employers who offer unlimited PTO but don’t extend that policy to fully-paid protected leaves of absence (LOAs) are “on very shaky legal ground” and likely violating multiple laws.
An unlimited vacation policy that pays employees anything less than their full salary during a protected LOA is arguably a violation of both the FMLA (Family and Medical Leave Act) and California’s CFRA (California Family Rights Act) and PDLL (Pregnancy Disability Leave Law). Any argument to the contrary depends on two legal fictions, neither of which is likely to be accorded much respect by a court. – Sebastian Miller Law, P.C.
Matthew Sgnilek, Partner in the employment practice at O'Hagan Meyer, explains more. If an unlimited PTO policy doesn’t specifically exclude extended medical LOAs, employees can exercise their right to unlimited paid time off when taking one. In this circumstance, because employers are generally obligated to follow through on their written PTO policies, you could be legally required to give an employee unlimited fully-paid FMLA leave.
We strongly recommend you research FMLA and ensure that your PTO policy (whether or not it’s unlimited) is aligned. Here are some resources we found helpful when writing this article:
The Department of Labor’s website: FAQs, fact sheets, interactive tools, and more
For SHRM members, this article on how to coordinate FMLA with unlimited PTO
This article from Sebastian Miller Law, P.C.: Fully-Paid Leave Is Required If Employer Offers Unlimited Vacation Policy
This piece from Matthew Sgnilek at O'Hagan Meyer: Coordinating Unlimited PTO With Extended Leaves of Absence Giving You A Headache? Careful Policy Drafting Is Your Cure
Finally, to learn more about the risks of the intersection between unlimited PTO and FMLA, check out our companion piece, Unlimited PTO Pros and Cons.
Unlimited PTO and CFRA
On top of FMLA, employers in California also have to comply with the California Family Rights Act (CFRA). Similar to FMLA, there are numerous scenarios in which the interplay between unlimited PTO and CFRA can cause serious HR headaches and even legal liabilities.
All told, if you’re a California employer, it may seriously be worth avoiding unlimited PTO to reduce the complexity and headaches involved in navigating this compliance web.
For more info on the difference between FMLA and CFRA, we recommend this short piece on the key differences from Disability Management Employer Coalition, as well as this Sebastian Miller Law article about protected leaves of absence and unlimited PTO.
Unlimited PTO and Short-Term Disability
Short-term disability leave is a benefit that allows employees to take an extended leave from work due to illness or injury, without worrying about losing their job. Thomson Reuters describes it as “a form of insurance,” versus something like FMLA which is an actual law.
Because it’s provided at their discretion, employers have fairly broad leeway to write their own short-term disability policies. Most stipulate that employees receive a portion of their normal salary while on leave (typically 50-75% of their usual pay, according to Thomson Reuters).
Similar to FMLA, however, employers can get into trouble if their unlimited PTO policy doesn’t specifically exclude short-term disability leave. For example, even if your short-term disability policy states that employees will receive reduced pay, an employee who takes a leave under that policy could have grounds to demand full pay if you also have an unlimited PTO policy.
According to Karen Hooper, VP, Senior Compliance Manager at insurance platform Newfront, the solution is simple: simply write your PTO policy to account for this. In this blog on the subject, they include the relevant section text from a sample unlimited PTO policy:
If an absence is due to injury, illness, or a temporary or ongoing medical condition, or it is deemed to be a qualifying leave under a state or federal law or program, then the absence will be unpaid after ten (10) work days of PTO, per occurrence, in accordance with applicable law. This plan may affect applicable wage replacement benefits such as a workers’ compensation or disability insurance plans.
Remember: the difference between PTO and short-term disability can be confusing for employees. For example, this question on the r/AskHR subreddit shows how tricky these cases can get. Educate your employees as much as you can about when and where each leave type applies.
For more on the difference between short-term disability and FMLA leave, and how to determine which applies to a given case, we recommend this Thomson Reuters article.
Conclusion: Unlimited PTO and Other Leave Types
As we’ve discussed before, unlimited PTO is not a “get out of jail free” card to not have to think about PTO management. In fact, a poorly-written, improperly-managed PTO policy can quickly result in serious consequences for your business.
Whether you’re considering a switch to unlimited PTO or already have it, your PTO policy needs to be clear about how it interacts with other leave types. It should state exactly which leave types it applies to, and how you will handle cases where two types of leave overlap.
Finally, be sure to account for both the legality and the optics of your approach when your unlimited policy overlaps with another leave type such as parental leave. All types of PTO are important, and how you handle them can speak volumes about your organization’s values.
An effective unlimited PTO policy starts with the basics: here's everything you need to account for.