Q&A: Can Employees on Short-Term Disability Be Required to Use PTO?

Question:

Our short-term disability (STD) policy pays 60% of a disabled employee’s pre-disability income. I recently attended a conference where it was mentioned that employers cannot require staff to use PTO while receiving STD. Is there some law or regulation that says this?

I understand that some employees may not have any accrued leave to use, but if they do, then I feel we should require them to use it. If this is allowed, would it be as simple as modifying our policy to reflect the requirement?

Answer:

The answer to your question depends on several factors, starting with whether the employee is on FMLA at the same time as receiving short-term disability benefits.

If they are, then you would be required to comply with an FMLA regulation stating that employers can allow employees to supplement their disability benefits with employer-provided leave (up to 100% of the employee’s income) but cannot require it. (The regulatory citation for this is 29 C.F.R. 825.207(e).)

If an employee’s disability benefits end before they return from leave, you may then require them to use their PTO concurrently with any FMLA leave that remains after STD benefits end.

Whether the employee is on FMLA leave or not, the next step is to review the terms of your STD policy. Carriers often include an “Other Sources of Income” provision stating that an employee’s STD benefits will be reduced by other income received while out on STD. In other words, this type of provision prevents employees from receiving more than 60% of their pre-disability income while receiving STD. The types of income that are included in these provisions can vary, so it’s important to know what your policy says.

Finally, consider the following steps:

1. If your STD policy reduces benefits paid by the amount of paid leave received, consider asking them to change it. Many carriers will do this, although it may result in increased premiums. If interested, talk to your broker.
2. Consider revising your FMLA policy to reflect any changes you make, such as making it clear that employees can receive 100% of their income by electing to supplement their STD benefits with accrued PTO.
3. Always ensure you clearly communicate policy changes to employees and are compliant with applicable laws and carrier requirements.