Is An “Unlimited” Leave Policy Good Business For You?


A growing number of businesses are considering “unlimited” leave policies for their exempt employees.  Unlimited leave policies are excellent recruiting and retention tools that can foster a culture of trust and productivity at the right business.  But, the anticipated increase in efficiency and morale can be offset by a number of thorny issues that should be considered before implementing an unlimited leave policy. 

  • First, is your policy truly going to be “unlimited” or will it have some limitations regarding consecutive days taken off.  How will you handle serious health conditions? If FMLA applies to your business, will you provide paid leave for 12 or more weeks of leave due to the employee’s serious health condition? If you have conditions, or limitations, attached, you may not want to refer to it as unlimited leave. An option is to call it “open” leave. 
  • An unlimited leave policy must be written to dovetail with an employer’s obligations under the FMLA  and the ADA   For example, a policy might limit the maximum number of consecutive days off, but should refer to a separate “extended leave” policy for FMLA/ADA situations.  Limiting the maximum number of consecutive days off without references to such situations could violate FMLA and ADA.  In addition, without reference to a separate extended leave policy, an employer could be obligated to pay employees for twelve weeks of FMLA leave (plus whatever vacation time they might take).
  • An employer also should consider what it will do regarding employees’ existing accrued PTO balances and the possibility that more senior employees, who have accrued greater vacation or sick leave benefits, may view the policy as depriving them of an earned benefit for their dedication to the company.   
  • Anecdotal evidence suggests that employees working under an unlimited leave policy often actually take less time off than if they are given a set number of vacation and PTO days.  To obtain the intended benefits of an unlimited leave policy, an employer must have a culture that encourages time off to recharge and ensures that all employees have an equal opportunity to take time off.  In other words, management must lead by example and must ensure fairness in the application of the policy. 
  • Of course, abuse of the policy is always a concern.  In addition to requiring approval of management, it is vital that the employer have in place strong metrics for judging productivity.  If an employer implements an unlimited leave policy, it will not be able to terminate an employee because he or she took too much time off or was “never” in the office.  The employer must rely, instead, on whether or not the employee has met his or her production goals.

An unlimited leave policy is not for every workplace. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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