Unlimited Paid Time Off (PTO): US
This Unlimited Paid Time Off (PTO) policy is an approach for organizations (usually smaller ones) that want to offer flexible, non-accruing time off while still setting clear expectations around planning, coverage, and manager approval. There is no federal law that requires or regulates unlimited PTO policies (sometimes called Untracked PTO), but the details matter because time-off programs can intersect with state wage-and-hour rules (including when vacation is treated as earned wages), required paid sick leave laws, and job-protected leave requirements like the FMLA and similar state programs. A well-written unlimited PTO policy helps deliver a consistent employee experience, avoids accidental promises of payout, and makes it easy for employees and managers to understand how unlimited PTO works alongside legally required leaves.
The History Behind Unlimited Paid Time Off (PTO) Policies in the US
Unlimited PTO grew out of the messiness of traditional Paid Time Off (PTO) programs in the US. Employers built banks of vacation and personal time, tracked accruals, and then ran into a hard legal reality in many states: earned vacation can become wages. California made that rule famous through decisions like Suastez v. Plastic Dress-Up Co. (1982), which treated vacation as earned as work is performed and limited "use it or lose it" forfeitures, and other states followed similar wage-payment logic in their own ways.
That wage-treatment created a second-order problem for employers: payout liability at separation. Many state wage payment laws require paying out accrued, unused vacation if your policy promises it, and plaintiffs' lawyers regularly bring class actions over vacation accrual, rounding, caps, and payout practices. Unlimited PTO offered a clean-sounding alternative because there is no accrual ledger to fight about, but it also forced employers to get serious about the fine print. California's Division of Labor Standards Enforcement put guardrails around "unlimited" plans in a 2009 opinion letter, and the California Court of Appeal later signaled the same concern in McPherson v. EF Intercultural Foundation, Inc. (2020), where the court treated a so-called unlimited plan like an accrued vacation plan because it operated like one in practice.
Tech and professional services accelerated the trend in the 2010s as distributed work and always-on roles made rigid day-counting feel dated, and as employers tried to reduce payout exposure without looking stingy. Unlimited PTO became a best practice only when it came with clear boundaries, manager approval, and a culture that actually lets people take time off. The legal basics stayed the same: if your plan behaves like earned wages, courts and agencies may treat it like earned wages, even if the policy headline says "unlimited."
Which Law is the Unlimited Paid Time Off (PTO) Policy Meant to Comply With?
There is no federal law that specifically requires an Unlimited Paid Time Off (PTO) policy for US-based employees. We include this policy anyway because it is either (1) a common best practice that answers employee FAQs and sets clear expectations, or (2) a topic that is regulated in many states, so employers often use one company-wide policy that meets or exceeds the toughest state requirements.
How to Write a US-Specific Unlimited Paid Time Off (PTO) Policy
- Start with "why" and introduce the concept.
- Define PTO as flexible paid time off that can be used for any personal reason.
- Explain that PTO is not tracked as a bank and does not accrue.
- Set the expectation that time off is requested in advance and requires approval.
- Clarify that employees are expected to use good judgment and stay accountable for their work.
- Encourage employees to take meaningful breaks and address patterns of not taking time off.
- State that unused PTO is not paid out at separation.
- Separate unlimited PTO from legally protected or legally required leave and explain how they interact.
When to Include this Policy in Your Employee Handbook
The law does not require you to publish a policy or issue a specific notice. That said, you still have to comply with the requirements that apply to you as an employer.
This is a "depends on your workplace" policy. Include it if you offer the benefit, operate in a setting where this comes up, have a state-specific rule that differs from your national approach, or you've had issues in this area before. If you already have a clear all-employee policy that covers the same ground (and it meets US's requirements), you may not need a separate policy here.
Other Considerations
None.
Exceptions
None.
Model Policy Template for an Unlimited Paid Time Off (PTO) Policy
Unlimited Paid Time Off (PTO)
We trust you to manage your time responsibly and take the time off you need. Instead of tracking vacation or personal days, we offer unlimited paid time off to help you rest, recharge, and take care of life outside of work.
You can use PTO for any reason, whether it’s a vacation, a personal day, a health-related break, or time to support someone you care about. We encourage you to take time off when you need it.
How It Works
There’s no set number of days, and PTO doesn’t accrue over time. Instead, you request time off when you need it, and we’ll work together to make sure your responsibilities are covered.
Use good judgment, communicate with your team, and give as much advance notice as possible. Two weeks is ideal for planned time off. Time off still requires manager approval, especially during busy periods or when coordinating coverage for others.
There’s no payout of unused time when your employment ends, because there’s no cap or balance to track.
Guidelines for Use
PTO can be taken in full or partial days, depending on what makes sense for your needs and your team’s workflow.
You’re encouraged to take at least a couple of meaningful breaks each year. If you haven’t taken time off in a while, your {{manager}} or {{the HR Team}} may check in and encourage you to schedule some.
Unlimited PTO is meant to be used, not hoarded or ignored. Rested people do better work.
What’s Not Included
This policy is separate from job-protected or legally required leave (like medical, family, or military leave), which have different eligibility and documentation requirements. Those types of leave will run concurrently with any PTO you take, where allowed by law.
If you’re sick and unable to work, just let your {{manager}} know as soon as you can. We’ll support your recovery and determine whether PTO or another type of leave applies.
Communication is Key
We value flexibility, but our ability to deliver results as a team comes first. We expect you to:
- Communicate early and often about time off
- Coordinate coverage when needed
- Stay accountable for your work and responsibilities
When that happens, unlimited PTO works really well for you, your team, and {{Organization Name}}!
Questions? Just reach out to your {{manager}} or {{the HR Team}}.
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The information provided here does not, and is not intended to, constitute legal advice. Only your own attorney can determine whether this information, and your interpretation of it, applies to your particular situation. You should contact legal counsel for advice on any specific legal matter.