Attorney Warns Of The ‘PTO Trick’ That Some Companies Use To Steal Money From Their Workers
If you get paid out for your PTO, don't be so sure it'll be at your usual rate.
Andrey Popov / Getty Images / Canva Pro Most of us at one time or another have worked for a person or company who went out of their way to take advantage of its workers. But sometimes their ways of doing so may not be so obvious.
Case in point: a tricky PTO policy that employment attorney Ryan Stygar said could result in your employer pocketing money that's rightfully yours.
The labor lawyer warned of a PTO trick companies use to steal money from workers.
Laws vary state by state, but most of the time, when we leave our jobs, we're entitled to have any paid time off we still have lying around included in our final paycheck.
Now, you'd expect that time to be paid out at your usual rate, right? Well, think again. "This is a sneaky way employers steal from you," employment lawyer Ryan Stygar said in a TikTok video on the matter.
Stygar explained that what he called the "very sneaky" trick often costs workers "hundreds or maybe thousands of dollars when you accrue paid time off at an employer."
Companies will sometimes pay out PTO at a different rate of pay, pocketing money that is rightfully yours.
In many cases, PTO is considered a wage (as opposed to sick time, which usually is not). This is why you are usually entitled to any PTO that remains paid out to you when you leave a job.
"It's typically your regular rate of pay," Stygar said. California law requires that PTO be paid out at whatever your last salary or hourly wage was, for example.
Unfortunately, other state laws allow employers to set the PTO payout rate at whatever they want, and companies often do so for tax reasons. This, Stygar said, is where "wage theft happens" in the final payout. "The employer will give it to you at a lower rate than your regular rate of pay," in some cases passing the tax costs onto you.
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Employers will sometimes do this when you use your PTO while still working for the company, too.
It's not only when you resign that you can get hosed out of PTO money that's rightfully yours, either. Several commenters on Stygar's video who sometimes work the second or third shift, for instance, described being denied their "shift differential."
This additional pay, added on to their usual rate as an incentive or recompense for working the graveyard shift, was not included in these workers' PTO paychecks after taking vacations.
"They paid you less than you would have made if you had worked," Stygar explained, "and in both of those situations, the employer is not honoring the true value of your paid time off." And that money can really add up.
Stygar cautioned that unlimited paid time off is not a good solution because it makes wage theft even easier.
Many might think that unlimited PTO is the perfect answer to these kinds of underhanded employment policies, but Stygar said the opposite. He called it a "scam," mainly because unlimited PTO holds no cash value.
The nature of it being unlimited means you'd be entitled to unlimited pay when you leave, of course. "So, unlike some states where you can cash it out for money, if it's unlimited, there's no money attached to that," Stygar explained. "You don't get anything" when you leave.
On top of that, unlimited PTO has been found in studies to result in workers actually taking less vacation than they otherwise would. As Stygar put it, "[it] a lot of times turns into zero PTO" because workers are more likely to cave to deadlines and forgo time off when there's no urgency involved in using their vacation time.
Stygar pointed out that workers often feel pressured by leadership to forego vacations in workplaces with unlimited PTO, too. Many workers feel the policy is often implemented for precisely this reason and consider unlimited PTO to be a "red flag."
As for being paid different rates for PTO, the problem is it's often perfectly legal for employers to do this. In most cases, though, they need to disclose this practice in their employment contract, so it's important to read all the policies before taking the job.
Still, Stygar said if it happens to you, you should contact an employment lawyer because you may have a case — and regardless of what their policies may be, from an ethical standpoint, that pay belongs to you. "These kinds of things get tricky, but it's still theft," Stygar said. "It's your money."
John Sundholm is a news and entertainment writer who covers pop culture, social justice, and human interest topics.