Does PTO Count Toward Salary?
By Trevor Sheffield
April 5, 2023
Salary PTO laws might influence how you evaluate future job opportunities. When a candidate for a job position is offered the job, they’ll often want more details than simply the salary they’ll be earning. Benefits are a huge part of what attracts candidates to certain companies. One of the most common benefits discussed is paid time off (PTO). It’s important to employees to know how many days each calendar year they’ll be able to take off without their pay being docked.
Recently, a question was brought up in U.S. courts. Does PTO count toward an employee’s salary? Here, we’ll discuss why this question matters and what decision was reached.
Why Salary PTO Laws Matter
Surprisingly, what you may have considered a relatively small case has huge impacts on the working environment. Wage theft is when employers do not pay their workers what they are duly owed. Employees of Bayada Home Health Care Inc. argued that wage theft was being performed when their employers took away some of the PTO they had previously been given.
The employees argued that with deduction of PTO, they were no longer truly salaried workers and should not be exempt from working overtime. However, this brings additional questions to the forefront of the debate: is PTO required for salaried positions? When an employee leaves their job, should they be paid out for the PTO they have accrued but not used yet?
The answers to these questions are not standardized and are therefore up for debate. With strong opinions abounding, what decision did the courts make?
In the end, the courts ruled that the employer had the right to take away PTO from employees and that doing so was not wage theft.
A Reuter’s article discussing the conclusion of the case explains, “The 3rd Circuit panel said that while a salary is a fixed amount of compensation paid out at regular intervals, paid time off is a fringe benefit that has no effect on a worker’s wages and can be paid irregularly, such as when an employee leaves a company.”
This ruling answers other questions employers might have had regarding PTO. When making a job offer, PTO should not be included in the lump salary sum given to the candidate, for example. Additionally, PTO can be used as a motivational tool to inspire workers to meet productivity quotas or even as a detractor if employees do not meet suitable numbers. And regardless of whether employees are offered PTO as part of their salary benefits, they still cannot be paid for overtime hours.
While the end of this court case is finalized, there are many opinions regarding its conclusion. Some feel that this is the best course of action, agreeing with the courts that PTO can and should be used as motivation for employees to meet quotas. Others believe this merely opens the doors for employers to take advantage of their workers, demanding longer hours worked without pay in exchange for PTO.
While this may create changes in work environments out of necessity, those employers who continue to care for the wellbeing of their workers as individuals will always see more loyalty in their employees. The case may be finalized, but the decision to take away worker PTO should not be taken lightly.
Do you foresee this update and clarification of the definition of salary changing your approach to running your business?