HR Hotline: Can Unused PTO Cover Notice Period Wages?
Q: An employee quit, giving us two weeks’ notice. He has 10 days accrued unused PTO time we will pay out. Can we use that to cover his wages for the two week notice period and have him leave immediately? We’d really like to see him gone now.
A: You can apply his PTO payout to the notice period but, as with many options in life, there are consequences.
To preserve his separation as a disqualifying voluntary quit, you must pay him in full for the notice period, whether you require him to work or not.
The Connecticut Unemployment Board of Review has consistently ruled that where an individual tenders their resignation, and the employer does not permit that individual to work out the notice period and does not pay wages for the remainder of the time specified in the notice, the separation is considered a discharge at the point the employer discontinued the individual’s services.
The board has further opined that the payment of vacation pay for unused vacation time is not the equivalent of paying the claimant wages for the remainder of the notice period.
Vacation pay is not wages for time worked. Rather, it is a fringe benefit governed by the contractual agreement between the parties.
You might consider asking the employee to revise his designated resignation date in exchange for some additional payment, which might be less costly than the hit on your unemployment tax rate, assuming he would be seeking to collect.
Then again, sometimes the absence of a problem employee is worth the price of funding unemployment benefits.
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