There is no federal law requiring employers to provide employees paid sick leave--a short-term salary-continuation program for employees absent because of a non-job-related illness or injury--but most employers do provide it as an important employee benefit. Employers establishing or amending a sick leave policy should consider other disability income policies, how unused sick leave should be addressed, liability for sick leave, and general discrimination issues. When adopting a policy, employers must be sure that it fully complies with federal or state family/medical leave laws, the Americans with Disabilities Act (ADA), and any other applicable laws. There are many alternatives to standard sick leave policies, including flexible leave policies, no-fault attendance policies, leave donation programs, and paid-time-off banks.

Employers that offer paid sick leave usually require as a prerequisite that employees be employed for a certain minimum period, typically 3 to 6 months, before becoming eligible to take sick leave. Most employers use the “accrual” method of calculating sick time, in which employees earn a certain number of hours or days for each month worked, up to a fixed number of days annually.

Disability policies. After the sick leave period, an employee might need to go on short-term disability, an insured (or self-insured) program that pays a partial salary for a longer period than company-funded sick leave. If the illness or injury is further extended, some employers provide an insured long-term disability program, which also pays partial salary, and may be integrated with other benefits such as Social Security. Please see the national Disability Insurance section. Most experts agree that long-term disability is an important benefit because it protects employees against catastrophic illness or disabilities.

Unused sick leave. Larger organizations may permit employees to accumulate unused sick days from year to year, up to a maximum number of days, and sometimes use this cumulative time in place of disability insurance.

Another alternative particularly attractive to employers that must maintain production schedules is to “buy back” unused sick time at the end of a year either at full salary or at a certain percentage of salary. Other employers provide incentives--cash bonuses, prizes, or personal leave time--to encourage employees not to use their sick leave. Some employers allow employees to donate their unused sick leave to co-workers on extended medical leave.

Liability for accrued sick leave. It is important to keep in mind that if an employer offers sick leave--whether through a handbook, with an oral promise, or simply by day-to-day practice--some courts may consider the offer an implied contract and hold the employer liable for any unpaid allowance. Employers typically limit their legal liability by means of a written policy that places a limit on the total amount of paid sick leave that any employee may accrue. Once the limit has been reached, no additional sick time accrues until some of the employee's accumulated leave has been used.

A few state laws consider sick time the equivalent of wages; therefore, it must be paid at termination. In a few states, court decisions have said that if an employer offers paid sick leave and the employee has earned it by working through the accrual period, the time must be compensated at termination. Most states do not require that unused sick leave be compensated at all. Some employers opt to compensate unused sick leave regardless of the law, or under certain specified circumstances.

Discrimination. Employers should take great care that their sick leave policies are applied fairly and consistently to all employees.

Under the Americans with Disabilities Act (ADA), permitting the use of accrued paid leave or unpaid leave is a form of reasonable accommodation when necessitated by an employee's disability (EEOC Enforcement Guidance: Reasonable Accommodation and Undue Hardship Under the Americans with Disabilities Act).

According to the EEOC, an employer does not have to provide paid leave beyond what is provided to similarly situated employees. However, employers should allow an employee with a disability to exhaust accrued paid leave first and then provide unpaid leave.

Many employers have “no-fault” attendance policies under which employees are automatically discharged after they have been on leave for a set period of time, regardless of the reason for the absence. Although no-fault policies are not by themselves a violation of the ADA, an employer should be prepared to grant additional unpaid leave if the employee is covered by the ADA (i.e., a qualified individual with a disability) or the federal Family and Medical Leave Act (FMLA).

According to the EEOC, if an employee with a disability needs additional unpaid leave as a reasonable accommodation, the employer must modify its no-fault leave policy to provide the employee with the additional leave, unless it can show that (1) there is another effective accommodation that would enable the person to perform the essential functions of his or her position, or (2) granting additional leave would cause an undue hardship. Note that modifying leave policies is a form of reasonable accommodation (EEOC Enforcement Guidance: Reasonable Accommodation and Undue Hardship Under the Americans with Disabilities Act).

The Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits employers from discriminating against employees or applicants on the basis of genetic information about employees, applicants, former employees, or their family members. GINA applies to all public employers, private employers with 15 or more employees, employment agencies, and labor organizations. Under GINA, it is unlawful for an employer to request or require genetic information about employees, applicants, former employees, or their family members. Therefore, if an employer's sick leave policy allows supervisors to ask workers about the nature of the illness or injury before authorizing sick leave pay, or if a physician's statement is necessary for sick leave (i.e., after 2 or 3 days' absence), employers must consider GINA and the possibility that requiring such disclosure or certification may violate the law. Employers with such sick leave policies are advised to include the GINA "safe harbor" statement in their policies and advise employees of the GINA provision.

GINA safe harbor exception. Employers do not violate GINA if their acquisition of genetic information is inadvertent. To be covered by this exception, employers requesting medical information from an individual or healthcare provider must direct the individual or provider not to provide genetic information. The regulations issued by EEOC provide the following model safe harbor language for employers to include with requests for medical information:

The "watercooler" exception. Acquisition of genetic information is also considered inadvertent if a manager or supervisor learns genetic information about an employee by overhearing a conversation between the employee and others or by receiving it during casual conversation with the employee or others. Note: The exception does not apply if an employer follows up with "probing" questions, such as whether other family members have the condition or whether the employee has been tested for the condition.

Confidentiality. No matter how an employer obtains genetic information, the information must be treated as a confidential medical record and kept separate from personnel files. Access to medical files should be strictly limited. Information may be kept in the same files that an employer uses for confidential medical information under the ADA as long as the ADA's confidentiality requirements are met. EEOC has revised its employment law poster to reflect GINA's requirements. The revised poster is available through EEOC's website athttp://www.eeoc.gov. Employers also have the option of posting a supplement alongside their current EEOC poster to comply with GINA's notice requirement, also available on EEOC's website. A detailed analysis of the final regulations for GINA Title II, a sample medical request form with the safe harbor language, and related materials are available in the GINA Resource Center on HR.BLR.com at http://hr.blr.com/resource-centers/GINA.

The organization's policy on sick leave should be in writing and thoroughly explained in the company orientation program, as well as in the employee handbook, policy manual, or individual employee contract. The more contingencies the policy covers, the less likely an employer will be caught short in the event of a sudden and unexpected circumstance. When adopting a policy, employers must be sure that it fully complies with federal or state family/medical leave laws, the ADA, and any other applicable statutory mandate.

In drafting a new policy, employers should decide upon at least the following:

Employers that want to change a sick leave policy must be sure the changes are communicated in writing, conspicuously, and clearly, so that all employees are informed. If the policy was outlined in a handbook, the employer's best bet is to replace the handbook--or at least issue a new page for insertion, highlighting the changes both in the handbook and in a separate memo to employees. It is also a good idea to have each employee who receives the new policy sign a receipt stating that he or she has received, read, and understands the new policy.

The federal Family and Medical Leave Act (FMLA) requires employers to provide up to 12 weeks of unpaid leave to eligible employees for a variety of reasons related to family and medical care. Generally, leave taken under the federal FMLA is unpaid. However, employees may be eligible to receive money or pay while they are on FMLA leave by substituting paid vacation, sick, personal, or other paid leave time for unpaid FMLA leave time. The 2009 final FMLA regulations changed and substantially simplified the rules for substitution of paid leave for unpaid FMLA leave. Under the final regulations, if an employee chooses to substitute accrued paid leave for FMLA leave, he or she may do so. If an employee does not choose to substitute accrued paid leave, the employer may require the employee to substitute accrued paid leave for unpaid FMLA leave pursuant to the employer’s established policies for use of paid leave.

Note: The employer may require that an employee comply with its established leave policies for use of paid leave, even if they are more (or less) stringent than the FMLA’s rules. The 2009 final FMLA regulations do not permit employees to comply with a less stringent medical certification standard under the employer’s sick leave plan when the employee substitutes any form of paid leave for FMLA leave. Under the 2009 FMLA regulations, the employer has the right to require, as a prerequisite to FMLA leave for a serious health condition, that the employee provide a medical certification to substantiate a serious health condition—even in cases where the employee is substituting paid leave for unpaid FMLA leave.

When an employee chooses, or an employer requires, substitution of accrued paid leave, the employer must inform the employee that the employee must satisfy any procedural requirements of the paid leave policy only in connection with the receipt of such payment. This notice is provided in the federal Form WH-381 (Eligibility and Notice of Rights and Responsibilities). If an employee does not comply with the additional requirements in an employer’s paid leave policy, the employee is not entitled to substitute accrued paid leave, but the employee remains entitled to take unpaid FMLA leave.

Some examples of established employer sick leave policies that would most likely be acceptable under the 2009 final FMLA rule are limiting use of sick days to an employee’s own health condition, not for family; limiting use of sick days to illness, not preventive or well checkups; and requirements for advance notice or approval in order to use such paid time benefits.

Many states now have their own family leave laws that can affect the availability of leave or the terms and conditions of receiving leave. Please see the national Leave of Absence section.

Some employers choose to create leave donation programs (also known as “leave banks”) within their companies. This program allows employees to voluntarily donate portions of their accrued leave to a “bank” to be used by eligible co-workers who have already exhausted their own paid leave for medical emergencies or catastrophic medical conditions. Leave banks allow employees in dire medical situations to continue to take paid leave for what would otherwise be unpaid time while also boosting morale by allowing employees to help one another.

It is a good idea to have employees complete a leave donation program form, certifying that they are donating the leave voluntarily and that the leave will not be returned. Employers should also take care to make sure their leave donation program complies with all applicable federal and state law, especially the Fair Labor Standards Act (FLSA), which places restrictions on how employees may take time off. Please see the national Fair Labor Standards Act (FLSA) section.

Employers that are considering the adoption of a leave bank/donation program should first determine employee interest in such a program and then consider the following issues:

Confidentiality. Will the employer identify the individuals receiving and donating the leave?

Rules for eligibility. When can employees use the leave? For medical emergencies? Bereavement? For the employee's own illness, or to attend to an ill family member?

Method of donation. Can employees donate sick leave, vacation time, or both? Will there be a maximum limit on the amount of leave an employee may donate?

Some employers are replacing their vacation and sick time programs with what is known as a Paid-Time-Off (PTO) bank. PTO banks vary widely and tend to be personalized to the needs of the company. But in general, a PTO plan will “lump” all of an employee's accrued paid time off into one bank that the employee can use for a variety of purposes. If, for example, an employer's original policy provided for 5 sick, 5 personal, and 10 vacation days per year, a PTO plan might offer a bank of 20 days that the employee could use entirely as sick time, entirely as vacation or personal time, or in any combination.

Employers like PTO banks because of their simplicity. Under a PTO program, employers can concern themselves less with the reasons that an employee is taking time off, since there is no need to categorize the time. Note, however, that classifying medically related leave may still be necessary in order to count the time under the FMLA. In addition, PTO programs may improve the bottom line by reducing unnecessary absences. For example, employees know that by using a sick day, they are reducing the amount of time available for vacation purposes.

Note that in some states, PTO is regarded as deferred compensation, which must be paid to the employee as wages at termination of employment. This is worth considering in determining whether to have a PTO plan and how much year-to-year carryover of leave time to allow. Employers must also make sure that the PTO program does not conflict with the requirements of the FMLA and any other applicable federal and state laws.