Leave Policy for Small Business: Protected & Statutory Leave

"Leave" and "PTO" get used interchangeably, and that's where small businesses get into trouble. Discretionary vacation is a benefit you choose to give. A bank called PTO may also need to satisfy mandatory paid-leave rights. Leave, in the legal sense, is time you may be required to give — FMLA, state sick leave mandates, jury duty, military service, and in a growing number of states, paid family leave.

This guide covers the second category: the leave your business is obligated to provide, and how to write it into a policy before someone asks. If you're writing the discretionary vacation side, start with the complete PTO policy guide instead.

Leave policy vs. PTO policy¶

A PTO policy covers paid time off. A leave policy is broader.

It can include:

• Vacation or PTO.
• Sick leave.
• Paid holidays.
• Unpaid time off.
• Bereavement leave.
• Jury duty.
• Parental leave.
• Protected medical or family leave.

You do not need to write every section from scratch on day one, but employees should know where each category lives.

Start with ordinary time off¶

The most common requests are vacation, personal days, and sick days.

Define how much paid time employees receive, whether sick leave is separate, and how employees request approval. This is the everyday operating layer of the policy.

For the PTO portion, see paid time off policy for small business.

Add unpaid time off¶

Unpaid time off handles approved absences outside paid balances.

State whether employees must use available PTO first, who approves unpaid leave, and whether there is a maximum duration. Keep protected leave separate so managers do not accidentally treat legally protected absences like ordinary discretionary requests.

For more detail, use unpaid time off policy for small business.

Define holidays¶

List company holidays clearly. If employees work across states or countries, say whether holidays are based on location, headquarters, or a company-wide calendar.

If you offer floating holidays, define how they are requested and whether they expire.

What the law actually requires¶

This is the part most small-business leave guides skip. Here is the short version, with the thresholds that decide whether each one applies to you.

FMLA — unpaid, job-protected family and medical leave¶

The Family and Medical Leave Act is the big federal one, and it has two separate tests.

Does it cover your business? Private employers are covered if they employ 50 or more employees for at least 20 workweeks in the current or preceding calendar year. A current headcount below 50 does not by itself rule out coverage: prior-year staffing, joint employment and integrated-employer rules can matter. Public agencies and schools are covered regardless of size.

Is a given employee eligible? Even at a covered employer, an employee qualifies only if all three are true:

• They have worked for you for at least 12 months (not necessarily consecutively)
• They have worked at least 1,250 hours in the 12 months before the leave starts
• They work at a site with 50 or more employees within 75 miles

Eligible employees get 12 workweeks of unpaid, job-protected leave in a 12-month period for their own serious health condition, to care for a spouse, child or parent with one, for the birth or placement of a child, or for qualifying military exigencies. Group health benefits continue during the leave, and the employee returns to the same or an equivalent job. Military caregiver leave extends to 26 weeks.

A standalone private employer that never meets the coverage test generally is not covered, but separate state laws can apply at much smaller sizes. Confirm DOL’s employer and employee tests before deciding.

Paid sick leave — state, local and federal contract rules¶

There is no general federal paid-sick-leave mandate for all private employers, but certain federal contractors must provide paid sick leave. State and local laws also impose requirements, with different coverage, accrual, use and carryover rules. Our state-by-state reference table flags which states have a mandate alongside their payout rules.

Two things routinely catch small employers out. First, many of these laws have no employer-size threshold — one employee in the state can be enough. Second, a combined PTO bank only satisfies the mandate if it meets every statutory minimum for accrual, permitted uses and carryover; a generous bank with the wrong carryover rule still fails.

Note that mandates change. Missouri's paid sick time requirement, created by Proposition A, was repealed by HB 567 and employees stopped accruing under it on 28 August 2025 — so a Missouri handbook written in early 2025 may reference an obligation that no longer exists.

Paid family and medical leave — a growing state list¶

Several states operate paid family and medical leave programs; enacted programs can have different contribution and benefit start dates. Eligibility, funding and duration vary. For example, Washington distinguishes program benefits from job protection. If you employ anyone in a state with a programme, your obligation usually starts with registration and payroll withholding, not with writing a policy.

Jury duty, voting and military leave¶

• Jury duty. Federal law protects jurors in federal cases from termination; most states extend that protection and a minority require paid jury leave. Check your state.
• Voting leave. Some states require time off to vote, including paid time in qualifying circumstances. Thresholds and notice requirements vary.
• Military leave. USERRA applies to all employers regardless of size and gives service members reemployment rights after military service. There is no small-business exemption here.

Pregnancy, disability and accommodation¶

The Pregnant Workers Fairness Act requires employers with 15 or more employees to provide reasonable accommodations for known limitations related to pregnancy and childbirth, which can include leave. The ADA uses the same 15-employee threshold and can require leave as a reasonable accommodation. Title VII's pregnancy protections also start at 15.

The thresholds, in one place¶

Putting it in the policy¶

Name the leave types that apply to you and point at the process for the rest:

Some leave types are protected by federal, state, or local law, including family and medical leave, military service, jury duty, and pregnancy or disability accommodation. Employees should contact [HR/contact] to request any of these. [Company] will not retaliate against an employee for requesting or taking legally protected leave.

Two things to get right. Say who to contact, because protected leave requests that land with a line manager tend to get mishandled. And include the non-retaliation line — it costs you nothing and it is the claim that most often follows a badly handled leave request.

This is general information, not legal advice. Thresholds and state rules change, and a one-time review with an employment attorney is worth the cost before you publish.

Make approvals and records clear¶

Every leave policy needs an operating system:

• Requests go somewhere specific.
• Approvals come from a named role.
• Approved absences appear somewhere managers can see.
• Balances update consistently.
• Exceptions are documented.

Without this, the policy depends on memory.

Bottom line¶

A small-business leave policy should be complete enough to prevent confusion and simple enough to use. Cover the major leave categories, separate protected leave from ordinary requests, and make the approval workflow visible.