Is a PTO Blackout Policy Illegal? No, Here’s How it Works

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A PTO blackout is a period where employees can’t take time off work. Any PTO request that’s submitted during this period gets denied.

Companies will use PTO blackouts during:

  • Holidays
  • Seasonal busy periods
  • Before or after major events (like launching a new product)
  • Crunch periods to meet critical deadlines
  • An emergency that requires “all hands on deck”

Currently, there’s no federal law that regulates PTO blackouts. So you can implement PTO blackouts whenever you want.

Even during a PTO blackout, there’s still certain kinds of leave that you need to allow: like sick leave and FMLA requests.

Pay close attention to any mandated sick leave in your state (and any other state regulations around leave). Also make sure you’re up to date on how FMLA works.

Traps to Avoid with PTO Blackouts

Whether they like them or not, many employees at least understand the need for PTO blackouts at certain times of the year.

However, you don’t want to get to a point where your blackout policy becomes too strict and difficult for employees to rationalize. So, avoid these common mistakes to keep everybody happy.

Sick Time vs. Vacation Time

Ensure you comply with leave laws in the states you operate so you don’t break them by accident.

Generally, PTO blackouts on vacation time is legal. But you have to be careful with sick time.

This gets complicated if you use a general PTO bank instead of having separate PTO hours for sick time and vacation time. I greatly prefer having a single PTO bank that employees can use however they want. But this does create a real problem when a company has to use PTO blackouts.

If you have a PTO bank for all kinds of leave and you have a PTO blackout policy, any employee can simply say their PTO request is for sick leave. Even if you suspect they’re lying, you have to approve the request.

Yes, you never really know if a sick leave request is legitimate. But when sick leave and vacation are separated, the sick leave hours are typically limited. So folks can only do so much to dodge a PTO blackout.

If folks are exploiting a general PTO bank with sick leave requests, you can separate sick leave into its own bucket. Just make sure your sick leave follows your state laws.

Don’t Make it Worse with a Use-It-or-Lose-It Policy

Blackout periods at the end of the calendar year are commonplace in some industries. Like retailers needing workers on the floor to cope with the influx of seasonal shoppers. 

This becomes problematic when you have a use-it-or-lose-it policy in which an employee’s allocated or earned PTO expires at the end of the calendar year. Implementing a blackout when there’s a mad rush to use up PTO before it’s lost is essentially forcing employees to throw away their PTO. This will lead to widespread discontent.

Or you’ll encourage everyone to use their PTO right before the blackout. That might not be your busiest time, but things are probably ramping up. Having everyone on PTO isn’t ideal during that period.One solution here would be to move the date on which PTO resets to a less busy time of year. Another would be to introduce a PTO rollover policy in which employees may take unused time into the next calendar year.

Try to Approve Some Vacation

Paid time off is one of the most-valued benefits among employees. PTO blackouts are not going to be popular. So try to approve at least some vacation even during your busiest periods.

You may not implement a total blackout but rather offer a percentage of employees vacation time in a soft blackout.

A few ways you can do this:

  • Assess the reasons for PTO: some companies use employees’ reasons for wanting time off to assess who should be the first to get it during limited periods. But I wouldn’t recommend this as it makes the choice too subjective. Some managers may feel one reason is more important than another based on their own personal experiences.
  • Seniority: I’m never a fan of seniority based policies, it really discourages newer folks and sets a tone that hard work doesn’t always lead to rewards. But it is an option, and it’s pretty simple to implement.
  • Prioritize folks that haven’t taken time off: grant requests from those who have taken the least throughout the calendar year as they’re most likely to need a break to ward off burnout. Not my favorite either, it encourages folks to avoid PTO all year in the hopes of getting a prized slot during the holidays.
  • First-come, first serve: A certain number of requests will get approved based on which requests get submitted first. Super simple to implement. This is probably the best policy until you’re big enough that all the requests get submitted within minutes of the slots being available.
  • Lottery approval: Probably the best option, especially for larger companies. Everyone gets a fair shot. Keep in mind that randomness can be extra cruel. You will have folks that never get picked, and others get super lucky with back-to-back years. I’d add some additional policies like anyone that got picked in the last 2 years isn’t eligible for the upcoming year.

By having a fair process to approve some PTO, your blockout policy will appear much more reasonable. You’ll cut down on any disgruntled feelings from it. Folks will understand that busy periods are intense, and that you’re doing everything you can to make it work for everyone.

Blackouts During Religious Holidays

I’m not an employment attorney. If you have a situation where an employee is requesting time off for a religious holiday during a PTO blackout, get some legal advice.

Religion is part of Title VII which prevents employment discrimination on the basis of religion. If you’re not careful, you could end up with a discrimination lawsuit.

Unless an employee has previously provided you with this information voluntarily, you won’t know what your employees’ religious beliefs are. So bear in mind that this may come up when you announce a blackout.

If you can accommodate the request, it’s worth doing it. If there are scheduling difficulties, be open to a conversation and willing to make other arrangements. For instance, an employee may be able to celebrate their religious holiday and work a later shift.

And if you have to deny the request, I’d run that decision by an attorney before doing so.

Announce Blackouts Super Early

Do not under any circumstances surprise employees with a PTO blackout. If people have to cancel family vacation plans because of last-minute changes in policies, they’ll be extremely upset and rightly so.

I recommend announcing a blackout at least 6 months in advance and sending employees reminders leading up to the date. Again, be sure to share the reason for the blackout to reduce backlash.

And if you have annual blackouts, make new employees aware of this fact during the onboarding process. This shows you’re a transparent employer and it won’t come as a shock.

Folks can get onboard with just about anything as long as expectations get set in advance. It’s the surprises that really erode an employee’s trust in their company. Be transparent and announce early.

Keep Blackout Periods to a Minimum

If you must implement a PTO blackout, a single week is a good place to start. Lengthy blackout periods result in a serious uproar.

One Reddit user posted an email from their employer stating there would be a vacation blackout from November 1st to January 2nd:

The policy went viral, users were appalled at a two-month long blackout period, sharing comments such as “Marking off two full months as “no vacation” month should be illegal. At best it’s immoral and inhumane.”

Reward Employees for Their Cooperation

You know that blackouts can take a toll on employees. They’re put in a position that tips the scales of work-life balance in a less than favorable direction. So, it’s a good idea to show employees that you appreciate them and, in a way, make up for having to enforce a blackout.

You could offer wellness days or early finishes in less busy periods. Or you might offer employees perks to recognize their hard work, like gift cards or team meals.

Whatever you do, just make sure it’s genuine and has some weight to it. Being told that you’re forced to work over Christmas, not getting any time with your family, and then receiving a $10 Starbucks gift card? I’d  definitely get pissed. And rightly so. Either go above and beyond or don’t do anything at all.

Reduce Vacation Overlap with Rotations

If you have a lengthy busy period, your only option might be a vacation rotation.

Let’s say that you need as many people working as possible for the entire holiday season. From mid November until January 2nd. Doing a PTO blackout during the entire period gets pretty harsh.

Instead, you can do vacation rotations. You break the blackout period into different groups. Group 1 gets time off during the first period. Group 2 gets time off during the second period. Everyone gets some time off but in a controlled way so that enough folks are working on any given day.

There’s multiple ways to tweak this so it works for you company:

  • If different periods are more valuable than others, you can flip flop them each year. Like being able to take Christmas off, let a different group take it off each year.
  • If your busy season is spread out, you could let folks choose their PTO within a given period or month. Group 1 can submit PTO in July, Group 2 can submit in August.

When PTO Blackouts Make Sense

Although I’ve always avoided PTO blackout policies myself, there are a few instances where I would consider them:


Companies with Heavy Seasonality 

Retailers and ecommerce companies need all staff ready to go around the holiday season and their busiest dates. On Black Friday, for instance, consumers flock to stores in their masses.

There are also companies where seasonality is in their nature and blackout periods make sense at other times of the year. I used to work in the self development space, selling courses that helped people start their own businesses. That industry is heavily seasonal, a huge percentage of sales get made in January when everyone is looking for a fresh start. It wasn’t bad enough to require PTO blackouts but we might have been forced to if the seasonality was any worse.


Financial Services and Accounting Departments

Every year, I’m involved with our financial close and taxes. Q1 is notoriously stressful for the entire industry. Companies that provide financial services, along with the accounting department at any company, are extremely busy. It’s all hands on deck from January until mid-April. If I was running a financial department, I’d probably implement a PTO blackout during Q1.


Launch or Release Periods

Some companies have relaxed release cycles. Most SaaS companies are like this, small improvements get released weekly. But even then, there can be major product launches. Both during and after the launch, if it’s big enough, you may need to implement a PTO blackout. In the past, Apple has implemented a two-week blackout for product support staff when a new iPhone or iOS was released. 

In my experience, this is rarely an issue. Most employees realize that they need to be around for the launch. So I’d only consider a PTO blackout if PTO requests start to become a problem. But even then, it might be a sign of a rotting culture, or some poor hires that are making bad judgment calls.


Key Dates

Every company has a number of key dates throughout the year when they need all staff in the building. For example, you may have annual inventory days where staff needs to be at a maximum to ensure efficiency and accuracy. Another example is days dedicated to training, team building, and similar.

Just make sure these are true “do or die” dates. If you implement a PTO blackout for a weak reason, or a performative event, you’ll erode a lot of trust from your employees.

My Philosophy on PTO Blackouts

In every company that I’ve been an executive or a founder, I never implemented a PTO blackout. 

With the PTO policy I use, I give employees complete freedom to use PTO however and whenever they wish. Once they accrue their PTO hours, they can use them however they like. When I deny PTO requests, it’s because they don’t have enough hours for it. Then I design company systems to avoid “do or die” periods entirely.

Honestly, the biggest problem I run into is getting the best folks on my team to actually use PTO. This comes up more often than any other issue I’ve seen with PTO.

I’ll do anything I can to avoid blackouts in the future. They put a ton of pressure on employees and cause discontent. 

But the truth is, we’re not a seasonal business so naturally we have less need for them than other companies. I understand this makes things a lot easier for us. Other companies won’t be so lucky.

It’s not possible to keep every employee happy at all times. If you must introduce a blackout, do it in a way that mitigates the negative impacts.

Only use a blackout when absolutely necessary, keep its length to a minimum, inform employees as early as possible, and continue to keep employees informed of what’s going on and why.

You may be in a vacation blackout period but remember you need to make allowances in some cases, such as for sickness or religious obligations. Where possible grant some vacation by running more of a soft blackout and allotting PTO on a first-come first serve or randomized basis.


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