Every state has its own requirements regarding paying unused PTO. Here’s what Michigan says about PTO payouts:
- Companies aren’t required to pay out unused PTO if their company policies don’t require it.
- Companies offering PTO and PTO payouts must pay out unused PTO according to their company policies.
Learn all the details about Michigan PTO payout laws in this guide.
Michigan PTO Payout Laws Overview
Michigan’s Payment of Wages and Fringe Benefits Act is state legislation that mandates how employers must pay wages and fringe benefits to their employees. Under the law, fringe benefits refer to specific benefits other than wages, like sick time and paid time off (PTO).
Essentially, the law states that employees are entitled to the accrual and payment of their fringe benefits according to the employer-employee contract. If a contract states that an employee gets 40 hours of PTO a year, the employer must uphold that deal. Similarly, if the contract allows an employee to get all unused PTO as a payment when they resign, the employer must pay that PTO according to the contract’s details.
As mentioned, fringe benefits include various types of benefits. Here’s what you need to know about Michigan law for each:
- Vacation time: Michigan does not require vacation time, but employers who offer it must allow employees to accrue it according to the employer-employee contract.
- Family leave: Michigan follows the Family and Medical Leave Act (FMLA), which allows up to 12 unpaid weeks of leave within a 12-month period to care for a new child or a qualifying family member. Employers can choose to offer paid or extended leave.
- Sick time: Employees working for employers with at least 50 employees must accrue at least one hour of paid sick leave for every 35 hours of time worked, up to 40 hours per year.
- Personal time: Personal time off is not required in Michigan. Employers offering any form of PTO must refer to the employer-employee contract for accurate PTO accrual and payout.
- Bonuses: Like other fringe benefits in Michigan, bonuses are only required to be given to employees when the employer-employee contract requires them.
- Contributions: Deductions for contributions to retirement plans, health plans, and other benefits should also follow an employer-employee contract and are otherwise not governed by Michigan.
Michigan’s treatment of fringe benefits is similar to the PTO payout laws of several states in the country. It’s currently one of 30 states that don’t require PTO payouts unless the employer-employee contract requires them.
When Must Michigan Employers Pay Out Unused PTO?
Michigan itself doesn’t require employers to pay out unused PTO to employees. However, that doesn’t mean all employers are off the hook. Under the Payment of Wages and Fringe Benefits Act, companies meeting one specific requirement need to pay unused PTO to their employees.
Employers typically have a company policy or agreement that offers protection to both the company and its workers. Companies with a PTO policy usually include detailed provisions about PTO in their policies to ensure that everyone is on the same page about how PTO accrues, when it’s paid, how it’s paid, etc.
If your company has a PTO section outlining the company’s responsibilities and the employee’s benefits surrounding PTO, it likely has a subsection about PTO payout. If so, the company is required to follow what the policy says about paying an employee their unused PTO should they resign or get terminated.
When Do Michigan Employers Not Have to Pay Out Unused PTO?
Now, let’s look at situations in which Michigan employers are not required to pay unused PTO.
The Company Policy Doesn’t Specify PTO Payout
The only way employers are required to pay out PTO to terminated or resigned employees is if the company policy includes provisions for PTO payouts.
Therefore, if the policy includes information about PTO but doesn’t specifically say anything about a PTO payout, then the employer is not required to pay unused PTO by law. This can get tricky, though, depending on your policy language, so it’s a good idea to consult with an employment attorney just to be sure.
The Company Policy Specifies When PTO Payout Isn’t Allowed
Along similar lines, a company policy can state what is and isn’t allowed regarding PTO payout. So, if a company’s policy says that you can’t get the PTO payout you’ve earned if you don’t provide at least a two-week notice of resignation, then the company may not be legally required to provide a PTO payout.
Again, employers should check with their attorneys to ensure that any policy language is allowable by law.
What Happens If You Refuse To Pay Out PTO in Michigan?
As you might expect, not paying PTO to eligible Michigan workers can expose you to potential legal woes. Plus, it’s not a good look when employers refuse to do something that they promise in their company policy.
An employee can take you to court if your company policy states that they’re eligible for a PTO payout but you refuse to pay their PTO upon termination or resignation. All they need to do is file a complaint with the Michigan Wage and Hour Division to start the process.
Michigan state law says that employers who don’t pay PTO according to their company policy are subject to a misdemeanor, which carries a fine of up to $1,000, imprisonment of up to one year, or both.
Additionally, employers must not only pay back the employee their owed PTO according to the company policy but may also need to pay a 10% penalty on those fringe benefits annually until they make the payment. Michigan can also require employers to pay attorney and legal costs and up to twice the amount of the overdue PTO payout in damages.
What Happens If You Quit a Job With PTO Left In Michigan?
If you’re a Michigan employee, you should make sure you know and understand your company’s policy on PTO payouts. Michigan only requires that your employer pays you unused PTO if the company policy requires it, so what you’re eligible for is based on your company’s policies.
Reach out to the HR department or your supervisor for clarification if you aren’t sure of the company’s policy surrounding PTO payout.
If you know for sure that you’re entitled to a payout of your unused PTO, but your company refuses to pay or hasn’t yet paid according to the timeline outlined in the company policy, file a complaint with the Wage and Hour Division. You can download the form to mail or complete an online version.
Summing Up Michigan PTO Payout Laws
If you need another reason to have a clear PTO policy, here it is: Michigan, like many other states, requires employers to uphold their policies surrounding PTO. If your policy states that you owe employees unused PTO payouts when they leave, then you’re required to furnish those payouts.
Unclear policies allow for unnecessary confusion and leave space for interpretations that could lead to legal action by employees.
If you don’t already have a detailed section for PTO and PTO payouts, you should make one now and have it reviewed by a Michigan employment attorney.
