From the Hotline: Using Vacation Towards FMLA
Question: Can an employer require that vacation time be used as part of an FMLA leave?
Answer: Under the FMLA regulations, if an employee chooses to substitute accrued paid leave for FMLA leave, he or she may do so. If an employee does not choose to substitute accrued paid leave, the employer may require the employee to substitute accrued paid leave for unpaid FMLA leave pursuant to the employer’s established policies for use of paid leave.
In other words, if the company has an established written policy that they require the use of accrued paid time off (paid leave) then the answer is yes. If the employer has no established policy, then it is the employee’s choice whether or not to do so.
The other caveat to this is if there is any other pay (such as a short term disability STD plan) that is due the employee, then you cannot require the use of their accrued paid time off other than for periods that are unpaid, such as the waiting/elimination period or the amount over and above the benefits payments from the STD carrier.
Pertinent FMLA regulation on the substitution of paid leave: http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=6a5a2de69dc37eaa49d504d248efe540&rgn=div8&view=text&node=29:18.104.22.168.54.2.489.8&idno=29