Imagine the following situation. As a benefit of an employee’s contract, the employee earns Paid Time Off (PTO) at a fixed rate per month. For example, for every month an employee works, they earn 8 hours of PTO. However, many employers have a policy where despite the rate employees earn their PTO, they can take additional unearned time in advance. For example, in February the employee has 2 days’ worth of PTO accumulated but wants to take 3 days off. Many employers have a policy that allows them to take the full 3 days off because they will earn that additional time off in a month. For the purposes of this blog, we will call this a ‘PTO loan’ system. The second critical part about these PTO loan systems is that the employee is not gaining additional time off, they are spending time off that they will earn in the future before they have technically earned it if they continue working as normal.
Recently, some employers have implemented policies in their employee handbook addressing the situation where an employee quits or is terminated before they have earned the PTO that they “advanced” through a loan system. Some employers have implemented policies saying that in such situations, these “loans” will be repaid by subtracting time from the employee’s final paycheck. What are the rules and regulations for such systems and are they allowed in New Hampshire?
As many are aware, New Hampshire is an at will employment state where employees and employers are generally free to agree to the terms of their arrangement within the bounds of the law. In other words, where there are not specific prohibitions on conduct it is generally permissible in New Hampshire. An employee who has time deducted from their final paycheck under a PTO loan system would file a challenge with the Department of Labor under RSA 275:48 as a wage theft claim. The last time the Department of Labor published a written opinion on this issue was in 2003. In that decision, the Department determined that such a deduction for the PTO loan was impermissible where there was not an explicit authorization to do so in the employee’s contract. However, many factors such as the particulars of the language of the policy and a valid authorization for this system could change this outcome. Additionally, it is not clear how the Department of Labor would deal with this issue in light of changes to RSA 275:48 since this issue was last addressed in 2003.
If you believe you may have a claim for improper wage theft after termination, you may wish to speak with an experienced employment attorney. At Parnell, Michels & McKay, our employment attorney is prepared to speak with you to discuss the specifics of your claim and guide you through the process.