Workers’ Compensation: Can Workers Collect Sick Pay on Top of Disability Pay?

When an employee is out of work on workers’ compensation, and so is getting partial pay, and they take sick days out of our bank, do they get paid sick pay plus comp? Or can we somehow allocate the sick time to just the difference between workers’ comp and the employee’s regular pay? — Margaret C, HR Manager in La Jolla

The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state’s complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.

Excellent question, Margaret, as it requires the complex consideration of both paid time off (PTO) “banks” and leave of absence policies and practices. Although California employers can deduct or “charge” partial days from the banks of both exempt and nonexempt employees, there is potential legal liability in doing so, especially when an employee is on a protected leave of absence (LOA).

Special Protection

Employees who are on an LOA for a work-related illness or injury have protected status under California and federal law. In fact, most California employees on any type of medical, family (the federal Family and Medical Leave Act (FMLA)/California Family Rights Act (CFRA)), or military LOA have a protected status, meaning that any employer changes to employment terms, conditions, or benefits of employment are subject to charges of discrimination, harassment, and/or retaliation. To avoid such charges, employers should have clear and consistent policies and practices surrounding all aspects of any type of LOA, including use of PTO banked wages.

No Wage Supplementation Required

No current laws require private employers to supplement the wage replacement insurance payments that employees receive. Most of these programs, including workers’ compensation, state disability, and employer-sponsored short-term and long-term disability, do not cover 100 percent of an employee’s wages. 

However, if an organization, through its policies or practices, supplements any such insurance payments, whether by offering the use of “wages” available in PTO banks or offering supplemental wages, you should generally do so for all employees on any type of LOA. For example, some employers have had a practice of supplementing pregnancy disability payments (which are actually state disability wage payments). This may seem very benevolent, but another employee may challenge the practice if his or her medical LOA for cancer, AIDS, or some other serious condition is not given similar wage supplements.

Establish Consistent Policies/Practices

Margaret, the best answer to your question will be found in your organization’s current policies and/or past practices regarding the use of PTO banks and LOA. Here are a few policy considerations:

• Define any limitations on the use of PTO. For example, consider precluding substitutions of vacation bank time for sick bank time when an employee has depleted his or her sick bank. Without this preclusion, substitutions may be requested under any circumstances. (Having no preclusion also defeats the purpose of separating these two types of PTO.) If you do combine vacation and sick time into one PTO bank, define any limit to its use.
• Either preclude or limit use of PTO banks to supplement LOAs of any kind. If you wish to allow such use, define any limitations, such as, “employees may not combine PTO and any wage replacement program beyond 100 percent of regular wages.”
• Place a “hold” on PTO accrual while an employee is on any type of LOA.
• Define any “cap” (accrual balance limitations that trigger a stop of accrual until the balance is reduced below the cap) or carry-over provisions.
• Describe any circumstances under which a PTO bank will automatically be “charged” if an employee is not working. For example, if an employee requests a personal, nonmedical, non-FMLA/CFRA leave of absence, you might have a policy of deducting from the PTO bank.
• Preclude or define any limits to PTO payouts, taking into account that some payouts are required by law.

Summary

Although the law doesn’t require employers to supplement wage replacement benefits, to avoid employee legal challenges, organizations should establish consistent policies and practices if they allow or require PTO benefits to be used when an employee is on a protected LOA.

Finally, Margaret, if your organization has no current policy or past practice on PTO use during an LOA, whatever you do in this situation will establish a precedent that will have to be considered in any similar situation within your organization in the future.

Diana Gregory, SPHR, is senior human resources specialist at the Walnut Creek office of Administaff, a professional employer organization and human resources outsourcing firm.