Basics

• The Fair Labor Standards Act is the primary federal law governing labor and employment. The FLSA does not require payment for time not worked, including vacation time and sick leave, according to the U.S. Department of Labor. Collective bargaining agreements with labor unions, as well as individual employment agreements, may make paid leave a contractual right of employees.
  
  

Issues

• If employers offer vacation time and sick leave, they generally may establish a use-it-or-lose-it policy according to which employees forfeit days they do not use by the end of the year. A form of unpaid sick leave is mandatory in certain circumstances, according to a federal law. The Family Medical and Leave Act requires many employees to receive up to 12 weeks off in a given year to deal with issues such as childbirth or serious health conditions.
  
  

Considerations

• Employers should put their vacation policy in writing, specifically in an employee handbook or company policy manual. Formally codifying the policy potentially helps the employer fend off complaints of unfairness and, in more drastic scenarios, lawsuits. Employees might allege discrimination if leave benefits do not apply equally to workers of all ages, races, religions and other protected employee characteristics. But employers have a right to offer benefits only to some workers based on, for example, length of service. A written policy helps clarify this distinction.
  
  

Alternatives

• Some employers have opted to provide paid time off as a single quantity, rather than offer vacation time and sick leave separately. In this case, employees receive a certain amount of paid time off per year and may use it to take vacations, nurse illnesses or for other reasons. This practice negates the possible abuse of sick days by employees, especially toward the end of the year, when they might want to use the leave to pad their available vacation time.