
On January 14, 2025, the Department of Labor (DOL) clarified how the Family and Medical Leave Act (FMLA) substitution rule applies when employees receive state or local Paid Family and Medical Leave (PFML) benefits.
What is the FMLA Substitution Rule?
The FMLA substitution rule allows employees on unpaid FMLA leave to use their accrued paid leave (e.g., vacation, sick leave, or PTO) at the same time. This provides income during otherwise unpaid leave.
Key points about the rule:
- Employees can choose, or employers can require, the use of paid leave during FMLA leave.
- Paid leave runs concurrently with FMLA leave.
- Exception: If an employee is already receiving income from short-term disability (STD), workers’ compensation, or state/local PFML benefits, the substitution rule does not apply because the leave is no longer “unpaid.”
How Does This Apply to PFML Benefits?
The DOL clarified that if an employee receives PFML benefits (partial income replacement from state or local programs), FMLA leave is no longer unpaid. In these cases:
- Accrued paid leave can only be used to “top up” PFML benefits (to make up the difference and provide full pay) if both the employer and employee agree.
- Employers are not required to allow “top ups” unless state law mandates* it.
What Has Changed?
For 20 years, the FMLA substitution rule allowed employees to use accrued paid leave during FMLA leave, except when income was already provided by STD or workers’ compensation.
The new guidance extends this exception to PFML benefits:
- PFML benefits are now treated like STD or workers’ compensation.
- If an employee receives PFML benefits, accrued paid leave can only supplement their income with mutual agreement.
- This approach ensures consistency as more states implement PFML programs.
Why Does This Matter?
- Employers now have discretion to decide whether to allow accrued paid leave to “top up” PFML benefits, except in states where laws mandate it.
- Employers must navigate the growing complexity of coordinating FMLA leave with state PFML programs and comply with state-specific laws.
- This guidance helps employers better understand their responsibilities and gives employees clarity on how FMLA leave interacts with PFML benefits.
Key Takeaways for Employers:
- Review state-specific PFML laws to determine if “top-ups” are mandatory.
- Establish clear policies on coordinating FMLA leave, accrued paid leave, and PFML benefits.
- Consult legal experts to ensure compliance with both federal and state requirements.
In theory, the DOL’s new guidance simplifies how FMLA leave and PFML benefits overlap while giving employers flexibility in most cases.
* While the opinion letter does not specify which states mandate these “top-ups,” it is known that certain states have specific regulations regarding the use of accrued paid leave in conjunction with state PFML benefits. For example:
- California: Prohibits employers from requiring employees to use paid time off (PTO) or vacation when receiving California Paid Family Leave benefits.
- Massachusetts: Allows employees to use accrued sick or vacation pay to supplement PFML benefits up to their average weekly wage, subject to the employer’s policies.
Given the variability in state laws, it’s essential for employers to review the specific PFML regulations in their state to determine if “top ups” are mandated.
If you have any questions regarding FMLA or other HR questions or concerns, please contact us at HRServices@501c.com or (800) 358-2163.
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The information contained in this article is not a substitute for legal advice or counsel and has been pulled from multiple sources.