As of July 1, 2015, employers in the State of California are now legally obligated to provide paid sick leave to all employees who work 30 or more days in a year. This is a generous benefit for the almost 6.5 million Californian employees who were previously unable to take paid time off when they, or someone in their care, became sick. However, it adds an additional and costly burden on Californian employers regardless of how generous their own policies may already be.
Healthy Workplace Healthy Family Act of 2014 (AB 1522)
New California Sick Leave Law for 2015
There are a number of new employment laws for 2015 as Governor Brown has signed 930 employment related bills from the California 2014 legislative session including the new Paid Sick Leave law (AB 1522) or the Healthy Workplaces, Healthy Families Act of 2014 as it is officially known.
As of September 10th, California became only the second state in the nation to provide paid sick leave with the signing of the Healthy Workplaces, Healthy Families Act of 2014.
What does this mean for you? For one, it means that as of January 1, 2015, the qualifying periods that determine which employees are eligible for paid sick leave and the employee notice required by Labor Code 2810.5 became effective and the actual entitlement began on July 1, 2015.
Many of the new laws make minor changes to the existing law, or only impact specific industries. Some of the new laws, however, such as mandatory paid sick leave, significantly change existing state law and will have a profound impact on many employer’s internal policies and practices. As an employer, you must familiarize yourself with new laws that will affect your day-today operations and policies for each calendar year.
What Does AB 1522 Do?
The law is extensive and far-reaching. The California Department of Industrial Relations has an entire webpage dedicated to the law, its impact, and employer resources, including a 45 minute webinar and an educational slide presentation that is 23 pages long! Here are some highlights of the new California sick leave law, AB1522, known as the Healthy Workplaces, Healthy Families Act of 2014:
- It adds eight new sections to the Labor Code and amends a ninth section, contains detailed record keeping and notice requirements, including a new poster requirement, provides penalties for noncompliance.
- The Act applies to all private and public employers regardless of size; small employers are not exempt.
- All employees who have worked in California for 30 or more days within a year from the beginning of their employment will be entitled to paid sick days under the Act.
- Part-time and full-time employees are covered as well as exempt and non-exempt employees.
- The new law requires employers to provide paid sick leave to any employee who worked in California for 30 days at an accrual rate of one hour for every 30 hours worked.
- Employers are allowed to limit an employee’s use of paid sick leave to 24 hours or three days in each year of employment and put a maximum cap on total accrual of 48 hours or six days.
- The effective date for employers to begin providing the paid sick leave benefit is July 1, 2015.
- Accrued paid sick days can carry over to the following year of employment, just like vacation. But, an employer can limit the amount of paid sick days an employee can use in each year of employment to 24 hours every three days.
- Some types of employees are not covered under the Act and are limited to the following four groups:
- Employees covered by a union contract that specifically provides for paid sick leave, has binding arbitration, and meets other specified requirements
- Construction employees covered by a valid union contract
- State providers of in-home supportive services under certain sections of the Welfare and Institutions Code
- Certain air carrier employees
Some California employers are already quite liberal with their time-of policies and you may be one of these. However, even in those instances where your existing policies may offer similar or better paid time of benefits there are still requirements for the employer.
For example, if you already provide paid time of which can be used for vacation or illness you will not have to provide additional sick leave as long as your provide at least 24 hours per year of paid leave that can be used for health care and meets other requirements in the law.
If your company offers unlimited time you may or may not track how much time employees take off or for what reason. However, the new law requires that employers separately track sick leave accrual and use anyway.
How the California Sick Leave Law Will Impact You
Beginning on July 1, 2015, California employers were required to provide paid sick leave to most of their full-time, part-time, temporary and even on-call employees. The stipulations and nuances of the law are challenging at best, and can be confusing and difficult, as well.
A possible scenario for employers according to an article from the California Employment Law website:
“So, imagine this. Employee is due in at 9 am. Employee wakes up to a suddenly sick child at 7:15 am (not foreseeable). The employer’s policy requires a 2-hour minimum call out for a missed shift. However, the employee misses that window and calls at 8 am (or maybe even at 9 am when expected at work). The employee has not found a replacement to cover the shift. Now what? Can the employee be disciplined for failing to use the employer’s call out procedure? For not finding a replacement? Unfortunately, the answer is very likely – no. The employer is stuck with an absent employee, no one to cover, and no one to hold accountable.”
The Challenges of the California Sick Leave Law for Employers
In addition, employers are required to provide most employees with an individualized Notice to Employee that includes paid sick leave information. And what if an employer fails to be in full compliance?
- If the Labor Commissioner finds an employer in violation of AB 1522 requirements any of the following actions could be required: reinstatement, back pay, payment of sick days unlawfully withheld, plus payment of an administrative penalty. According to the law, the administrative penalty may be the greater of three times the dollar value of the paid sick days withheld, or $250, to a maximum of $4,000.
- In addition, if an employer fails to promptly comply with the required penalty, the Labor Commissioner may take enforcement action, which could result in a penalty of up to $50 per day per employee whose rights are violated.
- AB 1522 does include some language that protects employers. For example, an employer cannot be assessed any penalty or liquidated damages “due to an isolated and unintentional payroll error or written notice error that is clerical or an inadvertent mistake regarding the accrual or available use of paid sick leave.”
- While employees may not file lawsuits against employers for allegedly violating the new paid sick leave provisions, the Labor Commissioner or the Attorney General can and may file a civil action in court against the employer. If they win the suit, they are then entitled –“on behalf of the aggrieved” employee, to all the remedies mentioned above plus reasonable attorneys’ fees and costs.
As with many other California labor laws, the paid sick leave law has significant impact and a number of requirements for employers.
AB1522 and Employer Sick Pay Policies and Procedures
Many new laws and regulations went into effect in 2015, but few have the significant and immediate impact on your payroll process as AB 1522.
The California Department of Industrial Relations (DIR) provides a short list of six steps to follow in order to comply with the new law. But one thing they did not list is that employers must also notify existing employees of changes for how they manage paid sick leave.
Newer employees should have received that information when they were hired by receiving the Wage Theft Protection Act notice. But all your employees should receive written notice which the Division of Labor Standards Enforcement (DLSE) provides. It is available in different languages on their website, as well. Employers whose paid sick leave policy differs from the statutory minimum requirements will need to modify the form accordingly.
Here are six points to keep in mind when revising your previous sick pay policies and practices:
1. Understand employee eligibility for paid sick leave under the new law
An employee qualifies for paid sick leave by working for an employer on or after January 1, 2015, for at least 30 days within a year in California and by satisfying a 90 day employment period, which works like a probationary period, before an employee can actually take any sick leave.
Temporary employees of a staffing agency are covered by the new law. Therefore, whoever is the employer or joint employer is required to provide paid sick leave to qualifying employees
2. Know how qualifying employees accrue and take paid sick leave
Starting July 1, 2015, employees will earn at least one hour of paid leave for every 30 hours worked. That works out to a little more than eight days a year for someone who works full time. But employers can limit the amount of paid sick leave you can take in one year to 24 hours, or three days.
Because paid sick leave accrues beginning on July 1, 2015 or the first day of employment if hired after July 1, 2015, the 12 month period will vary by hire date for those employees hired after July 1, 2015. Therefore, the measurement will mostly be tracked by the employee’s anniversary date.
3. Note that your employer policies may provide more paid sick leave but not less
The new law establishes a minimum requirement, but an employer can provide sick leave through their own plan or establish different plans for different categories of workers. However, each plan must satisfy the accrual, carryover, and use requirements of the law or put the full amount of leave into the employee’s leave bank at the beginning of each year in accordance with the PTO policy.
If an employer provides a policy which exceeds the minimum requirements, including providing a specific cap, the policy must be clear as to the additional terms that apply to their employees.
4. Understand for what reasons and purposes an employee can take paid sick leave
An employee can take paid leave for themselves or a family member for preventive care or care of an existing health condition or for specified purposes if they are a victim of domestic violence, sexual assault or stalking. Family members include the employee’s parent, child, spouse, registered domestic partner, grandparent, grandchild, and sibling.
Preventive care would include annual physicals or fu shots. For partial days, you can require the employee to take at least two hours of leave, but otherwise the determination of how much time is needed is left to the employee.
5. Establish payment and tracking systems for leave earned and leave taken
The new law requires that an employer provide payment for sick leave taken by an employee no later than the payday for the next regular payroll period after the sick leave was taken. This does not prevent an employer from making the adjustment in the pay for the same payroll period in which the leave was taken, but it permits an employer to delay the adjustment until the next payroll.
Employees must be paid at their regular hourly rate. If their pay fluctuates because they receive a commission or piece rate, the employer will divide the total compensation for the previous 90 days by the number of hours worked and pay that rate.
6. Provide the required information to all employees
Beginning January 1, 2015, employers were required to post in a conspicuous place at the workplace, a poster containing the following information:
- That an employee is entitled to accrue, request, and use paid sick days
- That retaliation or discrimination against an employee who requests paid sick days or uses paid sick days or both is prohibited y That an employee has the right under this law to file a complaint with the Labor Commissioner against an employer who retaliates or discriminates against an employee.
As noted previously, employers are required to provide current employees with an individualized Notice to Employee that includes paid sick leave information.
Update: Recent Changes to the Original Law
On July 13th Governor Brown signed into law emergency legislation that amended and clarified certain provisions of the Healthy Workplaces, Healthy Families Act, also known as the Paid Sick Leave Law.
These new changes went into effect immediately.
What’s Been Changed in the California Paid Sick Leave Law?
Among other changes, AB 304 amends the Act as follows:
Clarifies that the 30-day eligibility period applies to time worked “with the same employer.” An employee who, on or after July 1, 2015, works in California for the same employer for 30 or more days within a year from the commencement of employment is entitled to paid sick days.
Sick Leave Accrual
Provides that an employer may use a different accrual method, other than providing one hour per every 30 hours worked, as long as the accrual is on a regular basis and an employee has at least 24 hours of accrued sick leave or paid time of by the 120th calendar day of employment or each calendar year, or in each 12-month period.
Provides that an employer may satisfy the accrual requirements of this section by providing 24 hours of paid sick leave that is available for use by the 120th calendar day of employment.
Clarifies that the “full amount of leave” means three days or 24 hours for an employer who chooses to “front load” leave.
Employee Use of Paid Sick Leave
An employer may limit an employee’s use of paid sick days to 24 hours or 3 days in each year of employment, calendar year, or 12-month period, rather than just year of employment.
Sick Leave Payment
Three alternative methods for calculating how sick leave is paid are now permitted:
1. Paid sick time for nonexempt employees can be calculated in the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time, whether or not the employee actually works overtime in that workweek;
2. Paid sick time for nonexempt employees can be calculated by dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment; and
3. Paid sick time for exempt employees is calculated in the same manner as the employer calculates wages for other forms of paid leave time.
An employer is not required to reinstate accrued paid time off to an employee, rehired within one year of separation from employment that was paid out at the time of termination, resignation or separation.
The reinstatement of paid sick leave upon rehiring is “subject to the use and accrual limitations set forth in this section” and confirms that an employer who cashes out sick leave/PTO upon termination of employment is not obligated to restore any sick leave/PTO upon rehiring.
An employer that provides unlimited sick leave to its employees may satisfy certain notice requirements by indicating “unlimited” on the employee’s itemized wage statement, or a written notice provided to the employee each pay period.
Although an employer must keep records for three years documenting the hours worked and paid sick days accrued and used by an employee, employers do not need to inquire or record the purposes for which an employee uses sick leave or paid time off.
Existing Paid Leave Policies or Grandfather Provision
An employer is not required to provide additional paid sick days if the employer has an existing PTO policy, provided the employer makes available an amount of leave that may be used for the same purposes and under the same conditions, and the policy satisfies one of the following options:
- Satisfies the accrual, carry over, and use requirements of the law.
- Provided PTO to a class of employees before January 1, 2015, pursuant to a policy that used an accrual method different than providing one hour per every 30 hours worked, provided that the accrual is on a regular basis so that an employee, including an employee hired into that class after January 1, 2015, has no less than one day or eight hours of accrued leave within three months, and the employee was eligible to earn at least three days or 24 hours within nine months.
- If the employer decreases the accrual amount or rate for employees covered under the policy, it must comply with the sick leave law (i.e., either meet the accrual requirements or provide 24 hours of leave at the beginning of each year of employment, calendar year, or 12-month period).
Careful Review is Required to Maintain Compliance with the Paid Sick Leave Law
With a number of ambiguous passages and impractical requirements in the law, employers have struggled to implement the California Paid Sick Leave Law. The law is unusual in that it contains stipulations not typically required for how employers have provided paid sick leave in the past.
These recent amendments seem to have corrected some of those problems, but employers should carefully analyze their sick leave or paid time of policies to ensure they are in compliance with these new requirements. California employers, particularly those intending to use existing PTO policies to comply with the Act, should review AB 304 carefully to ensure their policy is in compliance.