Whether leave taken under the federal Family and Medical Leave Act (FMLA) is paid or unpaid is an issue that can confuse employers and employees alike. The FMLA says that leave is unpaid, although employers are required to maintain their contributions to an employee’s health insurance premiums during the leave. But it’s not as simple as that. The FMLA allows accrued paid leave and compensatory time-off (“comp time”) to be substituted for unpaid leave. This turns what would otherwise be unpaid FMLA leave into paid FMLA leave. To understand how this works, read on. 

Background

The FMLA provides eligible employees with twelve weeks of unpaid, job-protected leave each year for their own serious health condition or to care for an immediate family member with a serious health condition (on serious health conditions, see my blog post here). To allow employers to limit absences, on the one hand, and allow employees to receive some income during a prolonged absence, on the other, the FMLA allows employers to require employees to use accumulated paid leave while out on FMLA, and allows employees, with certain restrictions, to choose to substitute accrued paid leave for unpaid FMLA leave when employers don’t require it. See the FMLA regulation on the substitution of paid leave here.

Substitution of Accrued Paid Leave

An employer has an absolute right to require employees to use all forms of accrued paid leave while on FMLA leave. The FMLA regulation on substitution of paid leave prohibits employers from adopting policies that prohibit employees from using accrued paid vacation or personal leave to convert unpaid FMLA leave to paid leave. An employee also has an absolute right to use vacation leave or personal leave at the same time as FMLA leave.

Restrictions on the Substitution of Sick Leave

Most FMLA-qualifying serious health conditions will also qualify for use of paid sick leave under the employer’s local policy. Under such circumstances, the regulation on the substitution of paid leave prohibits employers from restricting an employee’s concurrent use of sick leave to turn unpaid FMLA leave into paid FMLA leave. But employers may restrict an employee’s right to use paid sick leave during FMLA leave to those purposes for which sick leave is granted under its policy.

Substitution of Leave: An Example

John has injured his back while playing softball and requires surgery. John’s physician foresees inpatient treatment and a recuperation period that will keep John out of work for eight weeks, so John requests FMLA leave. John’s employer requires employees to use sick and vacation leave when they are on FMLA leave. John has 20 days of accrued paid sick leave and 15 days of accrued paid vacation leave. Pursuant to his employer’s policy, he will have to use all four work weeks of his accrued sick leave and all three work weeks of his accrued vacation leave during his eight weeks of FMLA leave. As a result, almost all of his FMLA leave will be paid leave.

Substitution Limited to Terms of Sick Leave Policy

Suppose an employer’s sick leave policy does not allow its use for anything other than the employee’s own medical condition. In that case, accrued sick leave could not be used during FMLA leave taken to care for a sick spouse. In the North Carolina case Daye v. Potter, the employer’s leave policy included not only personal sick leave, but a specified number of days of paid leave that could be used to care for dependents who were sick. After an employee on FMLA leave to care for his ailing wife used up his accrued dependent care sick leave, he asked the employer to allow him to use his accrued personal sick leave concurrently with the remainder of this FMLA leave. When the employer denied the request, the employee sued, alleging interference with his FMLA rights. The court found for the employer, noting that the employee was allowed to take his statutory allotment of FMLA leave, and that he was not entitled to convert that leave to paid leave where the employer did not normally provide paid leave for such situations.

Substitution of FLSA Comp Time

Imagine now that John in the example above is a nonexempt local government employee under the Fair Labor Standards Act. He has 40 hours of accrued compensatory time-off, or “comp time” (pursuant to his employer’s policy of giving one-and-one-half hours of paid time off in lieu of cash for overtime hours worked). He asks to use his 40 hours of comp time to turn his eighth and last week of FMLA leave, which would otherwise be unpaid, into paid leave. His employer must grant his request. Similarly, John’s local government employer may require John to use any accrued compensatory time-off that he has at the same time as his unpaid FMLA leave to turn unpaid leave into paid leave. See subsection (f) of the FMLA regulation on substitution of paid leave here.

Workers Compensation and Short- and Long-Term Disability Plan Payments

Workers’ compensation leave and short- or long-term disability leave are considered paid rather than unpaid leaves. But workers compensation and disability payment plans usually pay only 2/3 of an employee’s regular weekly wage. The FMLA regulation on the substitution of paid leave says that neither the employer nor the employee may unilaterally insist on the use of accrued paid leave to supplement the workers’ comp or disability benefits when leave runs concurrently with FMLA leave. They may, however, mutually agree to use paid accrued leave to supplement these benefits.

Light Duty Workers Compensation Assignment and FMLA Leave

Sometimes the health care provider treating an employee for a workers’ compensation injury will determine that although an employee cannot return to their original job, they are able to do a light duty assignment. Suppose the employee declines the employer’s offer of a light duty job. In North Carolina, this usually means that the employee will lose their workers’ compensation payments. The employee, however, is still entitled to remain on unpaid FMLA leave until the employee’s FMLA leave entitlement is exhausted. On the date that workers’ compensation benefits cease, the employer may require or the employee may choose to use accrued paid leave going forward for the remainder of the FMLA leave. An employee may not accept a light-duty assignment and remain on FMLA leave.

Substitution of Paid Leave for Unpaid Leave: A Summary

Three basic rules govern turning unpaid FMLA leave into paid leave:

• An employer may require that an employee on FMLA leave use accrued vacation and sick leave at the same time as FMLA leave.
• If the employer does not require it, an employee has the right to use accrued paid leave at the same time as FMLA leave; if the employee wants to use sick leave, then the reason behind the FMLA leave must be a reason for which an employee can take sick leave under the employer’s policy.
• An employer may require a nonexempt employee with accrued “compensatory time-off” under the FLSA to use it concurrently with FMLA leave. If the employer does not require it, an employee has the right to use FLSA comp time at the same time as FMLA leave.