The State of Delaware does not require employers to pay out unused paid time off (PTO). That probably won’t change in the next couple of years, even with the state’s upcoming paid leave law.
We’ll talk more about this new law in a moment.
For now, here’s what Delaware employers need to know about the state’s PTO payout laws:
- There are no use-it-or-lose-it PTO policies in Delaware as of 2024
- You don’t have to pay out unused PTO unless your company policy or employment contracts say otherwise
Let’s take a closer look at the ins and outs of Delaware PTO payouts.
When Are Delaware PTO Payouts Required?
Delaware only requires PTO payouts if your company offers them as part of an employment agreement. And you do have to create one of these—if you have a certain number of employees.
The Delaware Department of Labor clearly states that any employer with four or more employees must clarify three things, in writing, on the employee’s date of hire:
- Their rate of pay
- The day, hour, and place of payment
- All details of the employer’s fringe benefits and policies—which includes PTO
In addition, employers must notify employees in writing if there are any changes to any of these components.
To stay compliant with Delaware’s labor laws, your PTO policies should be crystal clear from Day One. Our guide to creating an employee-approved PTO policy can get you started.
That said, the impending Delaware Paid Leave program makes things a little tricky.
What is the Delaware Paid Leave Law?
Signed into law on May 11, 2022, Delaware Paid Leave is the state’s paid family and medical leave (PFML) insurance program. Most Delaware employers will need to make their first PFML payments by early 2025. Eligible employees will be able to make claims for payments starting on January 1, 2026.
While Delaware may have been the first state in the United States of America, it’s far from the first to implement this type of program. Several of its neighbors in the northeast offer paid leave too, including Connecticut, Massachusetts, New Jersey, Rhode Island, Maine, and New York.
Under the new law, you must offer paid leave to employees who have been employed for at least one year and worked at least 1,250 hours with your company. When employees need their paid leave, they’ll need to apply for it.
Once approved, they’ll get up to 80% of their wages—or up to $900 a week—to cover these situations:
- Caring for a new baby or child (up to 12 weeks out of the year)
- Caring for a family member with a serious health condition (up to 6 weeks every 24 months)
- Caring for themselves when they have a personal health condition or injury (up to 6 weeks every 24 months)
- Military deployment challenges when loved ones are overseas (up to 6 weeks every 24 months)
Your employees will be limited to 12 weeks of paid leave every year.
Here’s how the program will be funded: employers will contribute 0.8% of each employee’s weekly salary to a fund managed by the Delaware Department of Labor (DOL).
Then, every time an employee makes a claim and gets it approved, the Delaware DOL will pay the employee from this fund every other week.
Employers can’t deny claims unless they explicitly fail to meet one or more of the plan rules. For instance, if somebody wants the paid leave to cover a family member’s absence from their workplace, that’s not a qualified reason for a claim.
Or, if the employee’s healthcare provider doesn’t complete the required forms within 30 days, the claim could get denied. (The Delaware Department of Labor says it’ll be working with state healthcare agencies to make sure this doesn’t happen.)
In a nutshell, here’s what employers are responsible for after they enroll for the Delaware Paid Leave program:
- Determining and tracking which employees are eligible for paid leave (a task made much easier if you use payroll software that automates everything for you)
- Calculating how much of each employee’s salary to contribute to the paid leave fund
- Making sure an employee’s application for payouts is justified under the plan
- Tracking each employee’s in-state hours and wages (again, payroll software will be your friend here)
Can You Skip Delaware’s Paid Leave Program if You Offer PTO?
No, you can’t. The only way a PTO policy would be able to stand in for the PFML program is if:
- You have had a paid leave plan in effect and in writing as of May 10, 2022, and;
- That plan offers similar benefits to those provided under the Delaware Paid Leave program, and;
- You already applied to count this pre-existing PTO policy via the DOL’s Division of Paid Leave’s Grandfathering/PLB Portal, and;
- You did this by the deadline of January 1, 2024.
Yes, that deadline has passed.
If you missed it, you must enroll in the state’s PFML program by January 1, 2025.
Who Must Enroll for Delaware’s Paid Leave Program?
Not every employer is required to enroll in the state’s paid leave plan.
If you have nine or fewer employees, you’re exempt. (We encourage you to offer a PTO plan that works for you anyway.) If you have 10 to 24 employees, you’re only on the hook for paid parental leave. But if you have 25 or more employees, you must offer them the full coverage mandated through the Delaware Paid Leave program.
The only two groups exempt from paid leave are the federal government and companies that operate seasonally, shutting down for a month or more during the year.
You can offer the mandatory paid leave in two ways:
- Enroll for the official Delaware Paid Leave plan
- Buy a private PFML insurance plan that provides the same or better benefits as the state plan
If you choose the second route, you’ll have to get approval from the Division of Paid Leave. You’ll also have to opt out of the official state program every year. The first often opt-out period is coming up quickly: it starts September 1 and runs through December 1, 2024.
How is the Delaware Paid Leave Program Different from FMLA?
Think of Delaware’s PFML program as FMLA, but paid. The Delaware PFML program has similar rules as FMLA: both require an employee to have worked for a company for one year before the employee is eligible. Both also require the employee to have worked at least 1,250 hours for you in that year.
But there are notable differences too.
FMLA isn’t paid leave, for one thing. Plus, FMLA is only mandatory for employers with 50 or more employees. That’s a lot more than the Delaware requirement to provide at least paid parental leave if you have 10 or more employees.
However, FMLA is still relevant in Delaware. Let’s say someone takes six weeks of Delaware’s PFML to care for a sick family member. At the end of these six weeks, they realize they’ll need six more weeks to care for that family member.
Under both Delaware and federal law, the employee is eligible for both FMLA and PFML. And since the employee is eligible for both types of leave at once, the leaves will be considered to be taken concurrently.
Since the Delaware only allows for six weeks of PFML to care for a sick family member, FMLA would give the employee up to another six (unpaid) weeks that year.
FMLA also allows employees to take leave in smaller increments than PFML. With FMLA, employees can take leave in hourly increments. With PFML, however, the smallest increment is one full workday.
Learn more on this PMFL fact sheet provided by the Delaware DOL.
How Does the Delaware Paid Leave Program Work With PTO?
Employers don’t have to pay out unused PFML because, remember, the program is more of an insurance setup than a PTO policy.
As with any other type of insurance, employees must make claims and get them approved before they get payouts. And the money doesn’t come from the employer—it comes from a state-managed fund paid into by all eligible Delaware employees.
However, there’s more to think about when you’re considering whether to offer PTO alongside paid leave. The Division of Paid Leave has dedicated an entire subsection (10.0) of the 19 Delaware Code Section 105 (19 Del.C. §105) to this coordination of benefits.
It essentially says that employers must be careful when they have both a PTO policy and are required to enroll in PFML.
These employers must present employees with a written policy that clarifies:
- Whether paid time off includes accrued vacation and sick leave
- Whether unused, accrued PTO must be used before an employee can access PFML benefits—along with how much of the accrued PTO must be used first
- Whether the use of accrued PTO counts toward the total length of leave provided
Even though employers can require employees to use accrued PTO for things that might also qualify for PFML payouts, there’s a limit. Employers can only require employees to use up to 75% of their available, accrued PTO.
After that, employees must be able to access their PFML benefits and keep their remaining accrued PTO, too.
And of course, if you’ve said in your written PTO policy that you will pay out unused PTO when an employee leaves the company, you must stick to that policy.
Delaware PTO Payouts and Final Paychecks
Delaware has clear rules when it comes to handling the final paycheck for employees who either leave their job or are terminated. Here’s what employers need to know:
- When to Pay: Final wages are due either on the next scheduled payday or within three business days after the employee’s last working day—whichever comes later.
- How to Pay: Typically, employers should stick to the usual payment methods unless the departing employee requests their final paycheck by mail.
- Late Payments: If an employer delays payment without a valid reason, they could face fines. Specifically, they’ll owe either 10% of the unpaid wages for each day the payment is late (except Sundays and legal holidays) or the entire amount of the unpaid wages, depending on which is less.
- Exceptions: There are exceptions for unexpected events like natural disasters or power failures, where employers won’t be penalized for delays caused by these events.
Delaware law doesn’t specifically address PTO payouts. But part of its wage and labor law states that employers who agree to provide benefits—like PTO payments for vacations or holidays—must make these payments within 30 days of their due dates. So if you write in your employee policy that you’ll pay out unused PTO upon termination, you’ve got 30 days to do that.
You can find more details about Delaware’s wage payment rules here.
What Happens When Delaware Employers Don’t Pay Out Unused PTO?
If a Delaware employer doesn’t pay out unused PTO when they’re supposed to, they could face several types of consequences.
These include:
- Fines: The employer might have to pay fines to compensate for any delay in providing the owed benefits.
- Legal Actions: Employees could have the right to take legal action against their employer. This could include filing a complaint with the Delaware Department of Labor. Or initiating a lawsuit for breach of contract or violation of labor laws. For employers, a lawsuit like this costs a lot of money—it isn’t worth the risk.
- Damages: Along with the actual amount of PTO owed, employers might have to pay interest on the unpaid amounts. This is especially true if the failure to pay out the benefits financially harms the employee.
- Enforcement Actions: Regulatory agencies may take other actions against the employer, like audits and other measures to make sure everything is lawful at the company. In other words? Increased scrutiny—and potential trouble if the company hasn’t been following the rules.
Since Delaware doesn’t have any state-specific PTO payout laws, the consequences are kind of up in the air. But they’re definitely not worth risking.
Need more advice on how to run payroll in The First State? See our guide to Delaware payroll for more tips.
