Wisconsin employers must pay out unused PTO if the employment agreement does not include a forfeiture clause. If your PTO policy allows for accrual without restrictions, for example, you’d need to pay that out to an employee either when they leave your company or at set intervals throughout the fiscal year.
This sets Wisconsin apart from states like Colorado, where forfeiture clauses aren’t allowed. Wisconsin employers have more control over their PTO policies.
Of course, there’s no state or federal law that says you must provide PTO to your employees. But PTO provides undeniable benefits to your employee and your company. Once you decide to create a PTO policy, you must follow the guidelines of each state where you do business.
If you run operations in Wisconsin or have remote employees who live and work in the badger state, you’ll need to know Wisconsin’s PTO payout laws.
The Wisconsin PTO Payout Laws in Detail
Wisconsin employers aren’t required to provide PTO. Once you do decide to implement a PTO policy, the paid time off counts as wages under Wisconsin law. Unless your PTO policy explicitly states that unused PTO is forfeited with each new fiscal year, you’ll be required to pay it out when an employee leaves the company.
Here’s what the Wisconsin PTO payout law says employers reserve the right to create any type of PTO policy they wish. An employer can build a PTO policy that gives employees paid time off. Employers can write just about any form of forfeiture clause into the policy. For example, you could give your employees:
- 10 days of PTO per year, only 2 of which are eligible to roll over into the next year if unused
- 10 days of PTO per year, all of which disappears at the end of the fiscal year or on the employee’s anniversary–in other words, a full-on use-it-or-lose-it policy
- 10 days of PTO per year, which will automatically be paid out at the end of the year if left unused
You can set the terms that work best for your company. Under Wisconsin law, you’re required to stick to these terms once they’ve been written down in a contract, employee agreement, or employee handbook.
Things get tricky when employers fail to clearly define the terms of a PTO policy.
Let’s say you give employees 10 days of PTO a year for the first five years of employment and 14 days for the second five years. Most of your employees make full use of their PTO or only leave a day or two unused every year. You’ve never had anyone ask to receive a paycheck for those unused PTO days once they leave your company.
Because of this, your PTO policy makes no mention of employees forfeiting unused PTO after a set amount of time. It’s never been a concern.
But suddenly, one of your most hardworking employees decides to take a job somewhere else.
This particular employee has only taken half of their vacation days each year, leaving five unused PTO days for the first five years and seven PTO days for the second five years. This means they have 60 total days of unused PTO, which they ask you to cash out in their final paycheck.
To keep things simple, we’ll say this employee earned $40 an hour during the first five years and $50 an hour for the second five.
You now owe your departing employee $22,000 in unused PTO. And if you can’t pay it, your employee can file a Labor Standards Complaint with the Wisconsin Department of Workforce Development.
To make matters more stressful for you, there’s a two-year statute of limitations for wage claims. This means that other employees who left your company with unused PTO within the last two years might learn about the Labor Standards Complaint. They might realize that your company owes them for unused PTO days, too. And you’ll be compelled to pay this money out or risk getting more wage complaints filed against you.
So how can you avoid this disaster scenario?
By making sure you create an intentional, detailed PTO policy that benefits your employees without setting you up for potential trouble down the road. We suggest hiring an attorney to look at your policy and make sure it’s clear, direct, and lawful.
What if My Written Policy or Employee Agreement Says It Will Be Paid but I Want to Do Something Else?
You still have to pay it. If you don’t, employees can submit a wage complaint. This could become a real problem for your business. Be intentional about building contracts that work for you and your employees, and then follow them to the letter.
Understanding the payout timeline for unused PTO is important too. In Wisconsin, final wages must be paid on the next regular pay date after an employee separates from the company. Depending on your PTO policy, this may include an employee’s unused PTO.
If you fail to pay an employee’s rightfully earned PTO, the employee can file a complaint with the Wisconsin Department of Workforce Development or with the court system.
Other Wisconsin PTO Laws
As with all states, Wisconsin does not require you to provide PTO. But Wisconsin has its own Family and Medical Leave Act (FMLA). Wisconsin’s FMLA guarantees unpaid time off when an employee experiences:
- The birth or adoption of a child
- A serious health condition
- The need to care for a parent, spouse, or child with a serious health condition
Any employer with 50 or more permanent employees for 6 of the last 12 months is covered by Wisconsin’s FMLA.
Employees who have worked for you for at least 52 consecutive weeks and 1,000 hours are eligible to receive FMLA under Wisconsin law.
“Serious health condition” is a pretty broad term, but Wisconsin law defines it as “a disabling physical or mental illness, injury, impairment, or condition involving inpatient care or outpatient care that requires continuing treatment or supervision by a health care provider.”
All covered employers have to allow employees to take up to two weeks of leave for a personal serious health condition or one that happens to a family member. Employers must also grant six weeks of unpaid leave for the adoption or birth of a child. Your employees can choose to take the leave all at once or intermittently.
Along with Wisconsin FMLA, employers must follow federal FMLA. Federal FMLA allows for up to 12 work weeks of unpaid leave in a 12-month period. But federal FMLA requirements might be different than Wisconsin FMLA. This means that in any certain situation, an employee might meet the requirements for Wisconsin FMLA but not federal FMLA.
If employees qualify for both types of leave, the leaves are used at the same time (concurrently). For example, if an employee wants to take 12 weeks of leave for the birth of a child, their six weeks of Wisconsin FMLA are spent at the same time as the first six weeks of federal FMLA.
The additional six weeks of federal leave would then carry the employee through to the 12-week mark. If your employee requests more time, it’s up to you as the employer to work with the employee to grant (or not) that extra leave.
Regardless of the circumstances surrounding the Wisconsin or federal leave, health insurance must continue as usual. Your employee must also return to the same position or an equivalent position to the one they held before they took the leave.
Can Employees Use PTO for FMLA Leave in Wisconsin?
Yes, employees must be allowed to substitute accrued or unused PTO for FMLA if you, the employer, have a PTO policy. As long as your employees follow the terms set out in your employee handbook or contract, that is. For example, if your PTO policy states that PTO requests must be put in at least 14 days before the requested date, you can ask your employees to follow that rule when they use PTO for FMLA leave.
This can work well when an employee has a foreseeable circumstance coming up like childbirth or surgery. But in an unforeseen circumstance, such as a car accident or other emergency, your employee could still benefit from using PTO for FMLA. It is up to you to choose to waive that 14-day notice before the PTO can apply.
You can require employees to use PTO for any Wisconsin or federal FMLA leave they take. In a similar vein, employees can use PTO for any Wisconsin or federal FMLA leave they take as long as they follow your company policy for requesting PTO.
Take a look at the state’s wage payment and collection law for more insight into Wisconsin’s PTO payout laws.
