One of the more frequently-received questions by NJSBA’s Legal and Labor Relations Services Department has to do with payment for unused accumulated sick leave (PUSL) and whether a board is required to provide such payment to its employees. In short, there is no legal requirement that any employee be paid for these days upon retirement. However, the vast majority of districts do provide some sort of payment. If the employees are not governed by a collective negotiation agreement, the board’s policy would control PUSL, and it can provide different plans/policies for different categories of employees.
This leads to the next question: What limitations exist for PUSL payments? In general, aside from those employees hired on or after May 21, 2010, who are capped at $15,000, there are no legal limitations. This means the board is free to negotiate any limit (or no limit) regarding this payment. For those employees not affected by the 2010 law, 67 percent of the contracts analyzed by NJSBA contain a capped PUSL plan regardless of the date of hire. Of those, 58 percent had caps below $15,000, with the lowest payout capped at $3,000 per employee. The average cap among those districts is $9,207.
Understand there are a variety of approaches to PUSL, from the straightforward fixed rate per day approach, to complicated formulas with numerous factors and variables affecting payment. The most commonly-used cost containment measure is caps on the maximum dollar payment (per individual or district-wide) and/or limits on the number of days which are payable. There are some controls the board should consider: having a minimum number of years with the district (most typically at least 15 consecutive years); the requirement that the individual actually retires and does not “defer” retirement; the utilization of a flat dollar amount as opposed to the employee’s per-diem rate; a cap on potential payout liability; and a notice requirement whereby the individual must advise of their intent to retire by a certain date.
Finally, one interesting aspect of PUSL has to do with the individual who is promoted from one position to another, for example from teacher to administrator. If the teachers’ union contract has a PUSL cap of $7,000, while the administrator’s union contract has a cap of $5,000, the individual becoming an administrator would be subject to the $5,000 cap. On the other hand, if the administrators’ PUSL cap was $10,000, the promoted individual would have the ability to earn an additional $3,000 OF PUSL.
In sum, PUSL is extremely common, and boards should seek ways to limit the potential exposure and liability. For more information, board members may reach out to the board attorney or contact the NJSBA Legal and Labor Relations Services Department.