PTO Laws: How They Work, State Requirements, and Penalties

Paid Time Off (PTO)

PTO Laws are essential for ensuring employees have the opportunity to take time off from work while still receiving their regular pay. These laws vary significantly from state to state, and understanding them is crucial for both employers and employees. In this blog post, we'll explore how PTO laws work, which states require PTO payout, and the penalties for non-compliance.

How PTO Laws Work

PTO laws mandate that employers provide paid leave to employees for various reasons, such as vacation, sick leave, jury duty, bereavement, and personal days. These laws can exist at the local, state, and federal levels, but there is no federal law that guarantees paid time off. Instead, each state has its own regulations and requirements.

State Requirements for PTO Payout

Some states require employers to pay employees for unused PTO when they leave the company. Here's a table summarizing the PTO payout requirements and penalties for non-compliance in various states:

State	PTO law(s) summary
Alabama	Alabama grants full-time employees jury duty leave at their regular pay rate. Employers cannot pull this time off from a preexisting PTO balance. However, the state has no requirement for any other leave.
Alaska	Starting July 1, 2025, all employees in Alaska are entitled to accrue a minimum of one hour of paid sick leave for every 30 hours worked. Employers with 15 or more employees may cap accrual and usage at 56 hours of paid sick leave per year, while employers with fewer than 15 employees may cap accrual and usage at 40 hours of paid sick leave per year. Employers may set higher accrual rates, accrual limits and usage limits. Exempt employees are assumed to work 40 hours per workweek for accrual purposes unless their normal workweek is fewer than 40 hours. The state allows employees to carry over their unused sick time to the following year, but it does not affect the amount of leave an employee may use in any given year.
Arizona	Arizona requires employers to provide one hour of paid sick leave for every 30 hours worked for a max of 40 hours annually for companies with 15 or more employees, and 24 for those with less than 15. The state also allows employees to carry over their entire unused sick time into a new year or opt to receive compensation for it.
Arkansas	Arkansas requires state employees to accumulate paid sick leave based on their tenure, with a max of 120 days annually.
California	California mandates a minimum of five days of paid sick leave per year. However, Berkeley and Los Angeles mandate 48 hours annually, and San Diego requires 40. The state allows for carryover of this leave, as well as eight weeks of partially Paid Family Leave (PFL). PFL pays around 70% of current earnings up to a maximum of $1,681 per week in 2025. The other 30% will be paid with accrued sick hours for non-baby bonding claims. As of Jan. 1, 2025, people on leave from work who apply for PFL or State Disability Insurance will receive 70-90% of their regular income, and employers will no longer be able to require employees to use up to two weeks of paid time off or vacation leave before receiving PFL benefits.
Colorado	Colorado requires employees to be paid $50 per day for the first three days of jury duty. The state also requires employees to accumulate one hour of paid sick time for every 30 worked. As of 2024, the state also requires up to 12 weeks of parental leave, with maximum compensation of $1,100 per week.
Connecticut	Connecticut grants eligible employees up to 12 weeks of paid medical, parental or family leave per year. Serious medical conditions may qualify for an additional two weeks of paid leave. Employees may also receive their normal rate for up to five days, then receive $50 per day from the state and accumulate sick time at a rate of one hour for every 40 hours worked. These laws apply to all employers with 25 or more employees. The maximum weekly benefit for 2025 is $981.
Delaware	Delaware‘s Paid Leave began accepting contributions on Jan. 1, 2025, and will start providing benefits on Jan. 1, 2026. Delaware offers paid leave to employees who have been employed for at least one year and at least 1,250 hours with a single employer. If their leave is approved, employees will get up to 80% of their wages (up to $900 per week). Employees are limited to a maximum of 12 weeks of total combined leave per year. The program will be funded by less than 1% of an employee’s weekly salary. Employers can require employees to contribute up to half the cost.
Georgia	While Georgia doesn’t mandate PTO, it does allow employees to use up to five days of their paid sick leave to care for a family member.
Hawaii	Employees in Hawaii can receive 58% of their average weekly wage, up to the maximum weekly benefit of $837 on Temporary Disability Insurance.
Illinois	Illinois employers with 51-100 employees must pay out up to 16 hours of accrued but unused paid leave for any reason at termination until July 1, 2025. After that date, any employer with 51-100 employees must pay out up to 56 hours of accrued but unused paid leave for any reason.
Louisiana	Louisiana allows employees to receive one day of PTO for jury duty.
Maine	In 2026, eligible workers will have 12 weeks of paid time off available to them for family or medical reasons, including illness, to care for a relative or for the birth of a child.
Maryland	Starting July 1, 2026, workers will receive job protection and be able to take time away from work to care for themselves or a family member and still be paid up to $1,000 a week for up to 12 weeks.
Massachusetts	Massachusetts’ maximum weekly benefit for paid family leave is $1,170.64.
Michigan	Michigan requires earned sick time to carry over each year. A business with less than 10 employees is not required to permit an employee to use more than 40 hours of paid earned sick time and 32 hours of unpaid earned sick time in a single year. Employers with 10 or more employees are not required to permit an employee to use more than 72 hours of paid earned sick time in a single year.
Minnesota	Effective Jan. 1, 2025, if an employer provides employees with paid time off or other paid leave that is more than the amount required under the earned sick and safe time (ESST) law for absences due to personal illness or injury, the additional PTO must meet the same requirements as the ESST hours, other than the ESST accrual requirements, when it used for an ESST-qualifying purpose. Employers can still apply their notice and documentation requirements that were in effect as of Dec. 31, 2023, when employees used PTO accrued on or before that date. However, employers cannot require employees to use PTO accrued on or after Jan. 1, 2024, before using PTO accrued before that date. In 2026, Minnesota will provide paid time off when a serious health condition prevents an employee from working, to care for a family member or new child, for certain military-related events or for certain personal safety issues. Beginning Jan. 1, 2026, benefits would be available to an employee unable to work due to a family member’s serious health condition, a qualifying exigency, safety leave, bonding leave or the employee’s own pregnancy, pregnancy recovery or serious health condition.
Missouri	Starting on May 1, 2025, Missouri law requires employees to accrue at least one hour of sick leave per 30 hours worked (up to 56 hours if employers have 15 or more employees and up to 40 hours for employers with fewer than 15 employees). Employees can carry over up to 80 hours of accrued, unused paid sick leave to the next year.
Nebraska	Effective Oct. 1, 2025, Nebraska requires employers to offer paid sick leave to employees who work for at least 80 hours in Nebraska. Employees need to accrue at least one hour of paid sick leave per 30 hours worked (up to 56 hours for employers with 20 or more employees, and up to 40 hours for employers with fewer than 20 employees). All unused, accrued paid sick leave must carry over to the following year, but employers may limit usage to the accrual cap.
Nevada	In Nevada, employers with over 50 workers must provide PTO at a rate of 0.01923 hours for every hour worked, for a 40-hour annual max. Since this PTO can be used for any purpose, the state doesn’t differentiate between forms of leave.
New Hampshire	New Hampshire allows employers to provide optional PTO for employees needing family and medical leave.
New Jersey	New Jersey requires employee contributions toward Family Leave Insurance (FLI) and Temporary Disability Insurance (TDI). The maximum weekly benefit for TDI is $1,081.
New Mexico	New Mexico requires employees to earn one hour of sick time for every 30 hours worked. Workers may carry over up to 64 hours of unused sick time each year, but employers don’t have to pay out this balance if an employee leaves.
New York	New York requires employers with over four employees (or $1 million in annual net income) to provide one hour of sick time for every 30 hours worked. Maximum accruals are defined by the size of an employer’s workforce, with a max of 56 hours per year. The state also requires businesses to pay $40 per day for the first three days of jury duty, and up to 12 weeks of paid family leave. Employees may receive $14,127.84 in total paid family leave benefits. As of Jan 1, 2025, employers with employees in New York must provide up to 20 hours of paid prenatal personal leave annually, in addition to the required paid sick leave. Additionally, New York’s COVID-19 sick leave expires on July 31, 2025.
Oregon	Oregon requires employees and employers to contribute to a paid leave fund at a rate of 1% per pay period, with employees covering 60% of that accrual. Employers with 10 or more employees must also provide paid sick leave at a rate of one hour per 30 hours worked, with an annual max of 40.
Rhode Island	Rhode Island permits qualified employees to take seven weeks of Temporary Caregiver Leave.
Tennessee	Tennessee allows for certain state employees to use paid family leave and requires paid jury duty leave for all employees. Paid family leave provides an employee with up to 30 workdays (six weeks) of leave to take care of a spouse, child or parent who has a serious health condition. In Nashville, full-time employees must complete six months of service before becoming eligible for paid family leave.
Vermont	Vermont’s paid family and medical leave benefits are available to purchase for individual workers who do not have access to them through their employer, including self-employed individuals and employers with fewer than two employees. Benefits begin on July 1, 2025.
Virginia	Virginia allows home health workers who work at least 20 hours per week to earn one hour of paid sick leave for every 30 hours worked. This leave is limited to 40 hours a year.
Washington	Washington recently modified the definition of “family member” for its paid sick leave program to include individuals residing with the employee and dependent on their care. It also expanded the usage rules by allowing employees and transportation network company network driver paid leave when a child’s school is closed due to emergencies and for absences that qualify for leave under the Domestic Violence Leave Act. Effective Jan. 1, 2025, the paid family and medical leave premium rates increased to .92%. Employers pay 24.48% and employees pay 71.52%. Businesses with fewer than 50 employees for the 2025 calendar year are not required to pay the employer portion of the premium. However, businesses must still collect the employee premium or pay the employees’ premium on their behalf.

Penalties for Non-Compliance

Employers who fail to comply with PTO payout laws may face various penalties, including:

• Unpaid wages: Employers may be required to pay the employee for the unused PTO.

• Triple damages: In some states, such as California, employers may be liable for triple damages for unpaid wages.

• Civil penalties: Employers may face civil penalties and attorney fees for non-compliance.

• Legal action: Employees may take legal action against employers for failing to pay out accrued PTO.

  
  

Calculating PTO:

First determine your state laws concerning PTO

Example: To calculate your PTO accrual for the month, use your annual accrual rate and the hours you've worked:

1. Annual PTO Accrual Rate: 24 hours per year

2. Monthly PTO Accrual Rate: Since there are 12 months in a year, your monthly PTO accrual rate is 24/12 = 2 hours per month. (@$20 per hour = $40 per month)

Since you've worked 160 hours this month, your PTO accrual remains consistent with your monthly rate:

PTO Accrued for the Month: 2 hours

Your pay rate or hours worked doesn't affect the accrual rate, as it's based on a fixed annual rate divided by 12 months.

PTO Annual Maximum: 24 x $20 = $480

PTO Accrual Formula:

PTO Accrued = Annual PTO Accrual hours/Total work hours in a year x Hours worked in the Period

Example: PTO Accrued = 24 (accrual max) hours/2080 hours = .0115 x number of hours worked (2080) = 23.92 accrued x $20 per hour = $478.40

The formula for Paid Time Off (PTO) depends on how your company accrues it. Here are a few common formulas:

1. Hourly Accrual (for hourly employees)

If PTO is accrued based on hours worked:

PTO Accrued per Hour Worked = Total Annual PTO Hours/Total Annual Work Hours

Example: If an employee gets 80 hours of PTO per year and works 2,080 hours per year (40 hours/week × 52 weeks), then:

80/2080 =0.0385 hours of PTO per hour worked

2. Per Pay Period Accrual

If PTO is accrued per pay period (e.g., biweekly):

PTO Accrued per Pay Period=Total Annual PTO Hours/ Number of Pay Periods per Year

Example: If an employee gets 80 hours of PTO per year and is paid biweekly (26 pay periods), then:

80/26=3.08 hours of PTO per pay period

3. Lump Sum (Annual PTO)

Some companies grant PTO as a lump sum at the start of the year, meaning no accrual formula is needed. Employees just get a set number of PTO days upfront.

Would you like a more customized formula based on your business's PTO policy?

PTO (Paid Time Off) is taxable because it is considered part of an employee’s wages. When an employee takes PTO, their paycheck includes the PTO amount, which is subject to:

• Federal income tax

• State income tax (if applicable)

• Social Security (FICA) tax

• Medicare tax

If an employee cashes out unused PTO (instead of taking time off), it is still taxed as regular income. However, some employers may withhold taxes at a higher supplemental rate if it's paid out separately from a regular paycheck.

Conclusion

Understanding PTO laws and their requirements is crucial for both employers and employees. By staying informed and compliant, businesses can avoid penalties and ensure their employees receive the benefits they are entitled to. If you need more detailed information about PTO laws in a specific state, be sure to check your state's department of labor website or consult with a legal professional.