Paid Time Off policies (PTO Policies) take the various employee entitlements to leave from work with pay and put them under one umbrella policy which provides employee time off entitlement which does not discriminate as to the reason for the time off. It wraps vacation entitlements, “sick days”, bereavement leave, parental time and any other entitlements into one policy.

Generally speaking, when converting various time off entitlements into a PTO policy, the total number of available paid days off work is reduced, but the entitlement is unconditional. Here is an example:

A workplace has the following paid time off entitlements established:

3 weeks vacation per year (we will assume all employees are equal in this regard) with a carryover entitlement of 2 weeks;
Up 6 sick days, no accumulation year over year and no payout if not used – must be used for actual employee illness;
3 days bereavement leave, no accumulation year over year and no payout if not used – applies to certain familial relations and employee must provide some evidence related to the need for the leave;
3 days “parental” time, no accumulation year over year and no payout if not used – available only to parents.

If employees at this workplace used every one of their annual potential paid days off, they would have access to a total of 27 days off. The PTO policy which the workplace implements has a total of 22 days of PTO entitlement per year (accumulating at a certain rate throughout the year or all upfront). The policy requires that at least 10 days be used each year (ESA requirement) and allows for a carry over of a certain number of days. There are no requirements for the use of the paid days off, other than rules regarding notice of the days off.

From a legal standpoint, there are a few considerations to address when converting your various employee time off entitlement into one PTO umbrella entitlement: First, the ESA vacation time and pay entitlements must of course be respected. Second, any unpaid leave entitlements must also be respected in the overall policy – for example a statutorily supported leave under Part XIV of the ESA, either within the PTO entitlement or outside of it. Finally, contractual entitlements must also be addressed. The conversion to a PTO Policy cannot have the effect of reducing benefits in such a way that a fundamental term of the employment contract has been violated, thus triggering a constructive dismissal of all employees.

The final requirement is the most challenging to navigate. If existing employee entitlements are conditional (i.e. sick days require a medical note if extending beyond two days) and the new PTO policy does not place any conditions (outside of notice, where practical) then even a reduction in total amount of theoretically available paid time off will likely not trigger a conditional dismissal as the benefit has not been truly reduced.

Some issues to consider when implementing a PTO policy:

How would a PTO policy fit in with the rest of your policies? For example, Short Term Disability policies (especially if employer funded) and Long Term Disability policies.
Carryover to next year: will employees be entitled to accumulate PTO year over year and if so, how much can be carried over? Your policy will have to comply with the ESA requirements with regards to vacation time and pay, at a minimum.
What time off will be specifically outside the policy – i.e. unpaid time off.
Will be overtime hours accumulate into the PTO bucket?

The benefits of a PTO policy:

employee ownership for time off decisions is empowering.
Employees with different life needs are treated equally.
Healthy employees feel rewarded by an increase in total days off.
“Mental Health” days do not carry guilt from employees
Can create some flexibility in how time off is taken – i.e. limit the total length of time taken at once (in compliance with ESA).
simplification of record keeping for HR

Some cautions when considering implementing a PTO policy:

As with all policies, must be consistently and equally applied or could just increase benefits
How you will make decisions if extended sick leave – cuts into vacation?
Ensure conversion does not create a constructive dismissal
Consult with employees to build policy