My question involves labor and employment law for the state of: Maryland, but company has offices in California as well
I have a question about the legality of a company cashing out employees’ accrued time off without their consent while they are still with the company.
First, some context. I work for a soft-money company. Scientists (Principal Investigators, or PIs) write applications for research grants and contracts and ‘park’ them at the company if and when they win; the company takes a cut and provides business and legal support, health benefits, etc. This is a pretty standard model. Because the company depends on PIs to generate revenue, PIs hold a lot of power (the company has a very horizontal power structure). However, there is very little in the way of guaranteed FTE/coverage and the PIs and their staff more or less have to support themselves. It is not uncommon for even senior researcher to go stretches where they have less have less than full time work.
However, the company does offer a very generous paid time off (PTO) accrual policy, allowing staff with billable hours to build PTO at a very high rate, with a very high max limit, which will carry on indefinitely. The purpose of this generous program is to provide staff with a buffer for leaner times. Staff also can cash out any portion of their accrued PTO each quarter. Staff with 100% coverage in terms of billable hours, if they desire, can earn 120% of their salary through cashing out PTO.
Additionally, the company offers extremely generous benefits. In order to be benefit eligible for any period of time, staff only need to maintain 60% FTE. Furthermore, only 20% FTE needs to come from projects (billable hours), and the remaining 40% can come from using PTO. PTO, therefore, can be very much a lifeline—as it is used during lean times to maintain benefit eligibility. By long-standing practice, staff are free to use accrued PTO when and how they choose.
Per company policy, if an employee runs out of enough hours to charge 20% to projects, he or she will lose benefits, regardless of how much PTO is accrued. However, staff in this position may still very well be active employees of the company—writing proposals, sitting on boards, playing smaller roles on projects, etc. They simply are categorized as non-benefit eligible and will have less work.
Recently, our CFO indicated that once employees are no longer benefit eligible (moved to part-time status), not only will they stop accruing PTO (per policy), but he will liquidate their accrued PTO and give them a check for a value. I have a problem with this and wonder if it is legal. Can a company legally cash out an employee’s (albeit part-time) PTO without their consent? Note that there is no written or established policy on this, and it is a long-standing, well-established practice at the company to let staff use their PTO when and how they choose. Even though a person is no longer getting benefits, burning PTO hours over time allows them to earn a regular paycheck and not take a huge tax hit all at once.
What’s worse is that liquidating part-time staff’s PTO makes it much more difficult for them to reach benefit eligibility again in the near future. With enough accrued PTO, employees need less support from projects--just 20%--to to meet the FTE requirement, and use PTO can make up the difference. Once PTO is cashed out, there is no going back, and staff now need 60% FTE from projects alone to meet the eligibility requirement.
My fear and suspicion is that this is an underhanded way to keep staff from regaining benefit eligibility if they have low levels of project work.
Is it legal to cash out PTO of employees’ without their consent? Is it legal to have a policy that makes it more difficult for one class of employee to regain benefit eligibility? I am upper management in this company and feel that my staff are not being treated fairly.