What a great idea and benefit: Allowing employees to deposit and withdraw leave, as needed, from a “bank.” So why do employers end up getting sued over it?

Let’s, for now, forget about all the state rules governing leave-sharing plans and concentrate on the major minefields - ones that should be avoided by companies that have a leave-sharing program or are thinking about starting one, according to the employment-law firm Littler:

Having an informal program that operates off-the-cuff and without set rules or criteria. This situation typically involves a small company where Sam or Suzie runs out of leave, has an emergency, and a bunch of employee pitch in voluntarily to make up the difference. Problem: If employee Mike later has a need and gets turned down or no one pitches in, you could have a discrimination problem if Mike is a minority.

A footnote to this problem category: Allocating leave without written requests or approvals. The three rules of lawsuit-avoidance apply here: document, document, document. Get the request in writing, and give the approval in writing, so that there’s no question later on.

Using leave for reasons other than medical emergencies or because of a major disaster. You’ll really want to avoid situations where Lulu withdraws leave from the bank because she’s come up short on the time needed to take that long-ago-planned vacation to Hawaii. When Lulu gets back, the Internal Revenue Service is probably going to hit you with a violation of tax laws covering leave banks for sharing. The IRS allows leave banks to escape taxation only under the emergencies/disasters rules.

Providing too much information attached to the request. Some employers feel the need to over-justify the approval and note in official records something like the employee “needs the time for treatment of breast cancer.” If you put in something like that, get ready to defend the company against an invasion-of-privacy suit. It’s OK to just say “for medical needs covered under the rules of the plan,” usually accompanied by a copy of a physician’s note.

Tags: internal revenue service, IRS, Leave, privacy