Q. We offer employees a set number of paid time off (PTO) days per year, which they may use for any reason, including vacation and sick days. Must we pay out all earned but unused PTO days upon termination?
A. Yes. Under Illinois law (and that of most other states), you can’t require employees to forfeit their earned but unused vacation; it must be paid out upon termination.
Unused sick days, on the other hand, need not be paid out upon termination. If an employer maintains separate vacation and sick day policies, it need not pay out unused sick days upon termination.
However, because PTO is used for vacation and sick days under your policy, you must pay employees all earned but unused PTO days upon termination.