On January 14, 2025, the Department of Labor issued an Opinion Letter regarding the applicability of the Family and Medical Leave Act (FMLA) substitution rule when an employee on FMLA leave is receiving state or local paid family and medical leave benefits (PFML).

The FMLA provides eligible employees the right to take job-protected leave for covered family and medical absences. FMLA leave is unpaid, however. The FMLA substitution rule addresses how and when employers can mandate, or employees can choose, to use employer-provided accrued paid leave (such as vacation, PTO, or sick leave) in order to receive pay during an otherwise unpaid FMLA leave.  

Under the FMLA substitution rule, an employer may require, or an employee may unilaterally choose, to use accrued paid leave during unpaid FMLA leave. When paid leave is “substituted” for unpaid FMLA leave, the accrued paid leave is used at the same time as, and runs concurrently with, FMLA leave. The FMLA regulations note that if the employee is receiving pay through short-term disability (STD) or workers’ compensation benefits, the substitution rule does not apply because the leave is not unpaid. This is true even if those benefits only afford partial pay to the employee. In those situations, the employee may use accrued, employer-provided paid leave to receive full pay while on FMLA leave only if the employer and employee agree.

Although the FMLA regulations only specifically mention STD and workers’ compensation as sources of pay that preclude applicability of the substitution rule, 14 states and the District of Columbia have passed PFML programs that provide partial income replacement for employees on leave for covered family and/or medical absences. Many of these programs cover the same leave reasons as the FMLA and provide that FMLA leave will run concurrently with leave under the PFML program. The DOL’s Opinion Letter is meant to address the question of whether an employee’s receipt of PFML benefits under these programs should be treated the same as the receipt of STD or workers’ compensation benefits during FMLA.

The Opinion Letter confirms that when an employee on FMLA is receiving PFML benefits, the FMLA substitution rule does not apply because the employee is not on unpaid FMLA leave. Instead, receipt of PFML benefits is treated akin to partial income replacement through STD or workers’ compensation. Therefore, both the employer and employee must agree to the employee’s use of accrued paid leave to “top up” the PFML benefits to receive 100% of pay.

As more states enact PFML programs, the DOL Opinion Letter will help employers navigate the complex issues that arise in determining how employer-provided accrued paid leave integrates with PFML benefits. Many employees want to use accrued paid leave to “top up” partial income replacement to receive 100% of pay. However, many employers find that “tops ups” are administratively burdensome or complicated to calculate. The Opinion Letter provides employers with the ability to decide whether to allow employees on FMLA to use their accruals to top up PFML benefits. However, employers should note that a few state PFML programs allow employees to “top up” benefits even without employer consent so employers should consult with knowledgeable counsel to determine the appropriate approach to take in each state.