California Outlaws Historic Ability of Employers from Requiring PTO Leave before PFL Leave

Effective January 1, 2025, California employers can no longer require employees to use accrued vacation or PTO before receiving state-funded Paid Family Leave (PFL) benefits. This update, made through an amendment to Section 3303.1 of the Unemployment Insurance Code (UIC), reflects a small but meaningful shift in how PFL benefits are administered.

Many HR teams and frontline managers have long operated under the assumption that employees must first exhaust PTO before accessing PFL. That is no longer the case—and ensuring compliance will require some basic policy updates and supervisor training to avoid missteps.

What Employers Need to Do

✔ Communicate the Change to HR and Frontline Managers

• Supervisors and HR professionals should be informed that employees cannot be required to use accrued vacation or PTO before receiving PFL benefits.
• If an employee submits a PFL request, it should be processed without any PTO requirement attached.

✔ Update Policies, Forms, and Training Materials

• While handbooks and formal policies can take time to update, employers should begin reviewing PFL request procedures, employee forms, and training materials.
• Make sure leave administration teams are aware of the new rule and that benefit coordination is handled correctly.

✔ Consult with Counsel on Best Practices

• Consider updating leave request forms to reflect the new rule.
• HR teams may need guidance on how this change interacts with PTO policies and other leave programs.

What Hasn’t Changed?

• Employees must still apply for PFL benefits through the Employment Development Department (EDD).
• PFL remains funded through employee payroll contributions (State Disability Insurance – SDI).
• Employers can still require notice and documentation for PFL leave, as long as those requirements align with state law.
• Paid Sick Leave (PSL) policies remain unaffected by this change.

Potential Risks for Non-Compliance

While this is not a high-stakes regulatory overhaul, employers should be mindful of potential risks associated with failing to implement the change correctly:

• Denial of Benefits: If an employee is incorrectly told they must use PTO before PFL, the employer could face wage claims or administrative penalties.
• Employee Complaints: Employees are becoming increasingly aware of leave rights, and denying benefits could lead to labor disputes or EDD complaints.
• Payroll and Benefits Errors: Misapplying the old rule could create payroll processing issues or incorrect benefit deductions.

Final Thoughts

This is a simple change, but it’s also an easy one to miss—particularly for HR professionals and frontline supervisors who have followed the previous rule for years.

The best approach is to communicate the change, update internal processes, and work with employment counsel to ensure a smooth transition.

For most employers, the priority is training and communication—ensuring that PFL requests are handled properly and that employees receive their guaranteed benefits without unnecessary delays.

If you have questions about policy revisions, compliance risks, or best practices, consulting with counsel can help streamline the transition.

This summary is provided for informational purposes only and is not intended to constitute legal advice nor does it create an attorney-client relationship with Rimon, P.C. or its affiliates.

Rimon’s employment law and executive compensation and benefits attorneys provide counseling advice as well as representation in litigation on a range of employment matters globally. Read more here