What Happens if Illinois Employers Misclassify Paid Leave as PTO?

 Posted on December 20, 2025 in Employment Law

Many Illinois employers believe they can rename existing PTO to comply with the state’s paid leave requirements. As a result, there has been an increase in employment citations against Illinois employers for misclassifying paid leave as traditional PTO. While the two may seem similar, Illinois law treats them very differently. Employers who combine or label paid leave incorrectly could face employee complaints, audits, and penalties.

The issue is not how much leave is offered, but rather how leave is defined and controlled. Regulators are now closely examining how Illinois employers structure, track, and restrict paid leave benefits. Understanding distinctions and keeping workplace policies legally up to date are critical compliance issues that can benefit from input from a Schaumburg, IL employment lawyer.  

Why Are Illinois Employers Being Cited for PTO Violations?

Illinois requires employers to provide paid leave that can be used for any reason. While many employers assume their existing paid time off (PTO) policies meet this requirement, this is hardly the case. Many PTO programs do not legally comply with the rules, resulting in employers being cited even when they offer PTO.  

Paid leave is time off that employers can use for any reason with no explanation as to why. Employers may not require documentation or restrict how this leave is used, and paid leave is different from vacation, sick leave, or personal time policies that include conditions or approval rules.

How Does Paid Leave Differ from Traditional PTO?

As noted, traditional paid leave usually has separate "buckets" for vacation, sick leave, and personal time, while PTO (like the state-mandated Paid Leave for All Workers Act) combines these into one pool for any reason. PTO has much more flexibility, but comes with specific state rules for accrual, specifically, one hour for every 40 hours worked, and usage. PTO requires no explanation, up to 40 hours per year. The key difference is between separation and combination.

Under paid leave, employees have distinct allotments for "fun" (vacation), illness, and appointments (personal days).  You might use all your sick days, then be unable to use vacation time for a health issue unless company policy allows it. Company policies for paid leave vary significantly from one employer to the next, and some have a "use-it-or-lose-it" rule regarding vacation time.

PTO or Illinois Paid Leave (PLAW) is mandatory for most employers in Illinois. PTO has a single "bucket" of paid time that can be used for any reason, including illness, vacations, and appointments. Employees earn a minimum of one hour of PTO for every 40 hours worked, or up to 40 hours annually. Employees are not required to state why they are taking the time off, and employers can frontload the 40 hours or use the accrual method. Employers may also cap carryover PTO.  PTO exists in addition to any separate vacation or sick time that an employer may offer.   

How Do Employers in Illinois Make Misclassification Mistakes Between Paid Leave and PTO?

Illinois employers are often cited for labeling paid leave as PTO without changing the language in policy manuals. Employers who require employees to explain why they need paid leave can also find themselves in trouble. Paid leave cannot be denied based on staffing needs, while PTO time potentially can. Paid leave must be tracked separately, and employers who apply disciplinary rules for using paid leave could find themselves in hot water.

The Illinois Department of Labor (IDOL) is actively enforcing paid leave rules. Employers can face monetary penalties, back pay obligations, required policy revisions, and increased audit scrutiny from complaints that often come from current or former employees. Many citations stem from poor recordkeeping or outdated handbooks. Policy wording is crucial, especially during an investigation or audit.

Contact a Schaumburg, IL Employment Law Attorney

If your Illinois business offers paid leave or PTO, now is the time to thoroughly review all policies. A knowledgeable Illinois employment lawyer from The Miller Law Firm, P.C. can help identify any compliance gaps, preventing costly citations. Attorney Miller has an MBA in Finance, in addition to his law degree. Call 847-995-1205 to schedule your free consultation.