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Leave: Is It a Good Idea to Allow Gifting of PTO Time?

Our PTO program wraps together all time off—sick leave, vacation, and personal time. Now we’ve had a suggestion that we allow “gifting” of PTO time; that is, permit workers with excess time to give it to a worker who, say, ran out of time and is dealing with an issue, such as his or her own illness or child problems. That sounds nice, but I was warned not to allow it because it will be discriminatory. An alternative is to just let people contribute PTO time to a general bank that any employee can draw on. That sounds bad to me—for myself, I might contribute to a friend in need, but not just to anyone who mismanaged his or her time. Anyway, what kind of policy would you suggest for gifts of PTO time? If we allow gifts to specific individuals, will we get nailed for discrimination or lauded for our thoughtful management?Walter K., HR Manager in San Francisco


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Programs that allow employees to donate time off date back more than two decades, but they have become increasingly popular in recent years with the rise of simplified paid time off (PTO) models and in the wake of national disasters such as 9/11 and Hurricane Katrina.

As your question suggests, employers who offer such programs (and according to one study, as many as 10 percent to 25 percent do) typically apply one of two approaches. Under the “leave bank” model, employees anonymously donate PTO to a centralized account on which qualified beneficiaries can draw as the need arises; under the “leave sharing” model, employees donate directly to particular co-workers in response to specific emergencies such as a serious illness or an injury.

A number of factors, ranging from administrative costs to company culture, can influence the approach a given organization takes. Some employers, for instance, might favor the leave bank model despite its higher administrative costs because it makes it easier to track cumulative liability for PTO benefits, and because it provides more protection to employees who lack close relationships at work.

Other employers, in contrast, might opt for the leave sharing system because it is cheaper to administer and offers employees the satisfaction of helping a friend directly.

If properly managed, there is no reason implementing a leave sharing program instead of a leave bank program should increase exposure to discrimination claims. Federal agencies, in fact, have allowed employees to donate time directly to one another since the Federal Employees Leave Sharing Act was passed in 1988, and similar programs are available in government agencies at the local and state levels in California, as well.

Regardless of the model you choose, however, you must manage it in the same fair and equitable manner you manage other aspects of your human resources functions, such as hiring decisions and compensation.

Employers in California are not obligated by law to provide benefits such as vacation, but if they do provide them, the benefits are fully subject to federal and state antidiscrimination laws. Well-intended benefits programs can be legally actionable if they have a disparate effect on groups protected by these and other employment statutes.

Here are a few precautions that can help ensure that all employees feel they have been treated fairly with respect to a leave sharing program:

  • Decide on your approach. Although some organizations offer both leave bank and leave sharing programs, picking one can reduce the risk of confusion and disappointment. If you create a leave bank, disbursement decisions should be made by the same individuals each time, or by a committee, who should act consistently and work from clearly drafted standards. Alternatively, if you opt for a leave sharing system, make sure employees understand that the amount of PTO raised in any given instance is beyond the company’s control and will vary.
  • Clearly establish who is eligible to participate. All PTO gifting programs should make clear which employees are eligible to participate. Often, these programs are available to all benefits-eligible employees who have exhausted other sources of support and whose circumstances meet certain predetermined requirements.
  • Clearly establish conditions and limitations. It’s important to establish the conditions that must be met for an eligible employee to receive assistance and to be clear about any limitations. Reasons for awarding supplemental PTO to an employee in need can range from personal illness and the illness of a family member to catastrophic loss of shelter. Companies draw the line at different points, but the important thing is to have a uniform set of criteria for determining exactly when an employee is entitled to avail himself or herself of the PTO gifting program.
  • Communicate about the program. Explain your PTO gifting program in your employee handbook and other human resources communication vehicles to ensure all employees are aware of it in their respective times of need.

Besides taking these precautions to reduce the risk
of discrimination claims, employers should take steps
to ensure that any leave sharing program does not violate
state laws prohibiting the forfeiture of vacation
benefits. Employees in California cannot be required to
“forfeit,” or otherwise release claims to, vested vacation
pay, and any PTO gifting program must be drafted and
managed so that no such forfeiture occurs.

Sandra Rappaport, Esq., is a partner at the San Francisco office of the law firm Hanson, Bridgett, Marcus, Vlahos & Rudy. Christian Wrede, who helped prepare this answer, is a summer associate at the same firm.