PTO Payout Laws By State
PTO Payout Laws By State

PTO Payout Laws By State

Most companies have formal paid time off policies. Regardless of whether you call it vacation time, sick time, furlough, PTO, PDO or some combination of the above, you should pay attention to states’ laws. This is a hot topic, with so many employees delaying using their accrued time off over the course of the pandemic. Considering the unusual circumstances, many companies have rewritten their PTO policies to allow unused days to rollover into 2021.

Does your state require employers to payout PTO?

Surrendering your terminated employees’ accrued and unused vacation time isn’t subject to federal law, but it’s important to pay attention to states’ laws since regulation is under their purview. If your company has locations in multiple states, it’s important to review all statutes regarding separation pay. This handy table should provide the basic information you need to know but be sure to check state departments of labor for specific guidelines. We’ll keep this updated with the latest state regulations on PTO payout in 2021 and beyond.

State  Statutory Requirements Addressing Vacation Pay  Use-It-or-Lose-It Policy  Payment of Accrued Vacation on Separation 
Alabama  Not addressed by state law.   Not addressed by state law.  Not specifically addressed by state law. However, if an employer has a formal vacation policy, it may not unilaterally rescind that policy. Employers must notify employees in advance if they decide not to continue paying accrued, unused vacation upon separation. 
Alaska  Not addressed by state law. Not addressed by state law but vacation pay is considered a vested right.  Not specifically addressed by state law. But, an employer’s policy or agreement determines whether earned, unused vacation is paid on separation. 
Arizona  Earned vacation time is considered wages when an organization has established policies or precedent of paying employees for this time.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
Arkansas  Not addressed by state law.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
California  Earned vacation time is considered wages.  Prohibited by state law.

Employers may implement a practical accrual cap on vacation time.  
Employees cannot be deprived of earned, unused vacation time, no matter the reason for separation, unless a willful agreement has been met by both parties. 
Colorado  Earned vacation time is considered wages.  Permitted by state law.

The Colorado Division of Labor established that a use-it-or-lose-it policy is permitted if:

  • The policy does not strip an employee of earned vacation time or associated wages.

  • The policy is addressed in a written agreement between the employer and employee.
  •  
    Upon employment separation, all vacation pay must be accurately paid and delivered to the appropriate parties. 
    Connecticut  Wages do not include vacation time.

    However, should an employer elect to offer vacation pay, the employer must honor the terms of its policy or employment contract.  
    Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    Delaware  Vacation pay is negotiated between employers and their employees.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. If they do, the value of the accrued time must be paid within 30 days of separation. 
    District of Columbia  Not addressed by state law.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    Florida  Not addressed by state law.  Not addressed by state law.  Not addressed by state law. 
    Georgia  Not addressed by state law.  Not addressed by state law.  Not addressed by state law.  
    Hawaii  Not addressed by state law.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. If this is generally provided by an employer, it must be paid on an employee’s last day. 
    Idaho  Should an employer elect to offer vacation pay, the employer must honor the terms of its policy or employment contract.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    Illinois  Earned vacation is monetized in “final compensation”.  Permitted by state law.

    In addition, employees must be educated about this policy, as well as have a fair opportunity to use vacation time.

    It is up to the employer to permit the carry-over of annual unused vacation time and determine how many days employees can carry over.  
    Unless a willful agreement has been met by both parties, an employer’s policy or agreement determines whether earned, unused vacation is paid on separation. 
    Indiana  When an employer provides paid vacation, it’s considered deferred compensation in place of wages.   Permitted by state law.  An employer’s policy or agreement determines whether earned, unused vacation is paid on separation. Without a policy in place, employees are entitled to any and all earned and unused vacation pay.  
    Iowa  Earned vacation time is considered wages.

    Additionally, employers that elect to provide vacation pay must comply with their established policies or employment contract.  
    Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    Kansas  There is no state law that requires employers to provide vacation time.

    If requested by an employee, a vacation policy must be provided in writing or displayed. 
    Permitted by state law.  Employers may restrict the payment of accrued vacation if their policy, for example, states that:

  • Employees will only earn vacation time when passing their anniversary date.
  • Employees that separate prior to their anniversary dates will not be entitled to compensation.


  • Employers are liable to provide the vacation pay established in their policy and practice.  
    Kentucky  Earned vacation time is considered wages when an organization has established policies or precedent of paying employees for this time.  Not addressed by state law.   An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    Louisiana  For payment of unused vacation time, an employee must:

  • Hold accrued vacation time.


  • Be eligible to take a vacation at separation.
  •  
    Permitted by state law.  Employers are required to pay employees any accrued, unused vacation time at separation. 
    Maine  Earned vacation time is considered wages when an organization has established policies or precedent of paying employees for this time.  Permitted by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    Maryland  Employers that elect to provide vacation pay must comply with their established policies or employment contract.  Not addressed by state law.  Without a written policy in place, highlighting the forfeiture of pay for accrued, unused vacation to a separating employee, the employee must be paid a cash value for earned, unused vacation. 
    Massachusetts  Earned vacation time is considered wages and employers are required to compensate employees for vacation pay.  Permitted by state law.

    Employers may establish a cap on vacation accrual but are required to give employees a fair notice of the policy.  
    Employers are liable to pay separating employees any earned, unused vacation time. 
    Michigan  Willfully contracted vacation pay is considered a fringe benefit, not wages.   Not addressed by state law.  Employers are liable to pay fringe benefits if outlined in their written policy or contract. Employers cannot revoke or withhold any payments due at an employee’s separation.  
    Minnesota  Earned vacation time is considered wages when an organization has established policies or precedent of paying employees for this time.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    Mississippi  Not addressed by state law.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    Missouri  Not addressed by state law.  Not addressed by state law.  Final wages do not include vacation pay. 
    Montana  Earned vacation time is considered wages when an organization has established policies or precedent of paying employees for this time.  Prohibited by state law.

    However, policies that put a maximum cap on vacation time are permitted for employers.  
    If vacation has been “contracted for” (i.e., promised, in writing or verbally) then it must be paid out on separation. 
    Nebraska  Vacation pay is a type of fringe benefit in the state of Nebraska and considered wages.  Prohibited by state law.  Employers are liable to pay separating employees any earned, unused vacation time. 
    Nevada  Not addressed by state law.  Not addressed by state law.  Employers may restrict the payment of accrued, unused vacation pay at the time of separation. However, employers should maintain a consistent policy. 
    New Hampshire  Earned vacation time is considered wages when an organization has established policies or precedent of paying employees for this time.  Permitted by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    New Jersey  Accrued and unused vacation are not considered wages.  Not addressed by state law.  Earned, unused vacation will not be considered wages unless an employer’s policy, agreement or union contract states otherwise. 
    New Mexico  Not addressed by state law.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    New York  Should an employer elect to offer vacation pay, the employer must honor the terms of its policy or employment contract.  Permitted by state law.

    Employers must provide an advanced notice of the policy.  
    An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    North Carolina  Should an employer elect to offer vacation pay, the employer must honor the terms of its policy or employment contract.  Permitted by state law.

    Employers must post notices in writing of any policy that requires or results in the loss of vacation time.  
    An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    North Dakota  Earned vacation time is considered wages when an organization has established policies or precedent of paying employees for this time.  Permitted by state law.

    Requires a notice of the policy and reasonable opportunity for employees to use the vacation time.  
    Employers are liable to pay a separating employee for earned, unused vacation time before separation.

    For private employers:

    You may revoke payment for accrued vacation time if:

  • The employer gave the employee written notice at the time of hiring about this policy.
  • The employee has been employed for less than one year.
  • The employee gave fewer than five days’ notice before separation.
  •  
    Ohio  Not addressed by state law.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    Oklahoma  Earned vacation time is considered wages when an organization has established policies or precedent of paying employees for this time.  Permitted by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    Oregon  Earned vacation time is considered wages when an organization has established policies or precedent of paying employees for this time.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    Pennsylvania  Earned vacation time is considered wages when an organization has established policies or precedent of paying employees for this time.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    Rhode Island  Earned vacation time is considered wages after one year of service when an organization has established policies or precedent of paying employees for this time.   Not addressed by state law.  Employers are liable to pay separated employees accrued vacation pay if they have served one year, or more, at their organization. 
    South Carolina  Earned vacation time is considered wages after one year of service when an organization has established policies or precedent of paying employees for this time.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    South Dakota  Not addressed by state law.   Not addressed by state law.  No state regulations in place. 
    Tennessee  Employers are not liable to create a written vacation policy if they elect to provide vacation time.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    Texas  Should an employer elect to offer vacation pay, the employer must honor the terms of its policy or employment contract.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    Utah  Should an employer elect to offer vacation pay, the employer must honor the terms of its policy or employment contract.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. If employers do not pay for accrued days upon separation, this must be state explicitly in the contract or policy. 
    Vermont  Employers who elect to provide paid vacation time are liable to their employees for these benefits.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    Virginia  Employers are not liable to establish a policy regarding vacation pay.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    Washington  Should an employer elect to offer vacation pay, the employer must honor the terms of its policy or employment contract.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 
    West Virginia  Earned vacation time is considered wages when an organization has established policies or precedent of paying employees for this time. Not addressed by state law.  If an employer has a written policy stating that accrued vacation time will not be paid at separation, they will not be liable to pay an employee.  
    Wisconsin  Earned vacation time is considered wages when an organization has established policies or precedent of paying employees for this time.  Not addressed by state law.  Employers are not required to pay employees upon separation. 
    Wyoming  Should an employer elect to offer vacation pay, the employer must honor the terms of its policy or employment contract.  Not addressed by state law.  An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. 


    Paycor Can Help

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