vacation or sick leave

Vacation, Sick Leave and PTO. Oh My!

With the different paid sick leave laws adopted by different cities and counties, not to mention California’s Healthy Families Healthy Workplaces Act, employers and employer are confused. Some employers combined their vacation and sick leave into PTO. Others  separated PTO into vacation and sick leave. Given the number of calls I receive from employers and employees regarding the difference between PTO, Sick Leave and Vacation, I thought a quick refresher would help.

Sick Leave

Sick leave is for sickness, illnesses and injuries.  California law requires employers to allow employees to use up to one-half of the employee’s annual sick leave to care for family members.  The Healthy Families Healthy Workplaces Act also allows employees to use paid sick time for certain domestic violence related purposes.


Vacation, on the other hand, is for any purpose. You can use vacation for a day in the sun, to go on a trip, or just lounge around the house.  You can, of course, also use vacation pay for illnesses. Employees typically plan vacations. Employees only sometimes plan sick leave. Employers must provide paid sick leave, but not vacation.


Paid Time Off (PTO) is a hybrid of sick leave and vacation. You can use PTO for anything you want, including sicknesses and illnesses.  Vacation and PTO are essentially the same.  You can use PTO to satisfy the paid sick leave requirement so long as the PTO offers the same or better benefits than the sick leave laws.  Some employers don’t want to track vacation separately from sick leave and so they lump them together as PTO. If an employer lumps sick leave and vacation together as PTO, the employer must treat PTO as vacation.

So, what’s the real difference? Vacation is a wage. Once an employee accrues that wage, the employer must pay it out. If the employee still has accrued vacation when the employment relationship ends, the employer must pay out the vacation at the employee’s current rate of pay. Sick leave, on the other hand, is not a wage. An employee is not entitled to use paid sick time unless the employee “meets the condition precedent” of being sick. That’s a fancy way of saying if you’re not sick (or have some other qualifying reason for taking sick leave), you’re not entitled to sick pay.

Having a bona fide sick leave policy allows employers, under certain circumstances, to reduce an otherwise exempt employee’s salary if the employee has exhausted his/her available sick time and takes additional time off for sickness or illness.  I’ve addressed this issue a number of times in prior articles.  Since PTO can be used for illnesses and sicknesses, it is a bona fide sick leave policy allowing the reduction mentioned above.

Employers should be careful whenever they reduce an exempt employee’s salary or they could find themselves losing the exemption entirely. Keep in mind: paying  a salary does not mean the employee is exempt from overtime. But that’s a topic for another discussion.

If you have questions about paid sick time requirements, vacation policies or PTO plans, contact a knowledgeable attorney and get the right answers.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

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