state sick leave laws also provide protection against retaliation. Broad UPTO policies often lack the structure to ensure compliance, particularly when tracking the reason for time off is avoided or discouraged. Broad UPTO policies may suggest to employees that all time off is protected by state sick leave laws. 2. FMLA and ADA Considerations Unlimited PTO policies may unintentionally convert unpaid FMLA or ADA-protected leave into paid leave, exposing employers to legal risk if not applied consistently. To reduce liability, employers should clearly separate unlimited vacation from medical leave and maintain distinct policies for FMLA, ADA and state sick leave compliance. 3. Wage and Hour Risks Though courts have not definitively ruled on whether an “unlimited” model fully protects against claims for unpaid leave upon separation, states like Colorado treat accrued vacation as earned wages. Employers converting to UPTO need a clear plan to handle existing balances. Since the Colorado Wage Act prohibits employers from employing a “use it or lose it” type policy, employers should encourage the use of earned PTO prior to converting to an UPTO policy. 4. Manager Discretion and Fairness Managerial inconsistency is a recurring challenge. Without clear criteria for approvals, employees may perceive favoritism or experience fundamental inequities, which can lead to morale issues or potential legal claims. 5. State Paid Leave Considerations Colorado, like many other states, offers partially paid family and medical leave to employees. Colorado’s Family and Medical Leave Insurance (FAMLI) program offers 12 weeks of partially paid leave to eligible employees. Employees might utilize their unlimited paid time off in lieu of applying for FAMLI benefits, prolonging an employee’s ability to later use job-protected leaves like FAMLI. Should Employers Offer It? Benefits: • Strong appeal among younger talent. • Reduced administrative tracking. • Potential savings from not paying out unused leave. Risks: • Legal compliance with sick leave, FMLA and wage laws. • Inconsistent usage and underuse by employees. • Managerial confusion and inconsistent enforcement. • Potential resentment from employees who are not eligible for the benefit. Edward Encinias, Esq., and Chelsea Jensen, SHRM-CP, PHR If you are considering rolling out or refining an unlimited PTO policy, take the following steps: 1. Define Who Gets It: Will it apply to all staff? Only exempt employees? Be clear and transparent. 2. Handle Accrued Leave Carefully: Consult legal counsel about paying out or phasing out existing PTO balances. 3. Coordinate with Other Leave Policies: Ensure that FMLA, ADA, HFWA (Colorado only), FAMLI (Colorado only) and other leaves are clearly defined and not overly broad in your UPTO model. 4. Train Managers: Equip them with guidance and documentation tools to ensure consistent approvals. 5. Clarify the Policy to Staff: Communicate expectations, coordination with other leaves and the process for administering the benefit. 6. Consider Hybrid Models: Some employers are adopting generous yet structured policies that strike a balance between clarity and flexibility. Unlimited PTO originated as an innovative initiative aimed at fostering autonomy and trust. Two decades in, the model has matured — and shown its limits. While some organizations still find it valuable, others are scaling back, citing confusion, legal complexity and cultural clashes. It remains an option — but not a cure-all. As of now, UPTO is less a revolution than a choice. For some organizations, it works. For others, it may be time to return to clearly defined, equitable and manageable leave programs. Either way, the key is thoughtful design, legal awareness and a culture that encourages people to take the time they need. If you have questions or need support tailoring a compliant approach for your organization, contact the Employers Council for guidance. Also, members can reference the UPTO white paper on our website by scanning the QR code. https://members.employerscouncil.org/viewdocument/ unlimited-paid-time-off-plans 7 Colorado Banker
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