California Employers, Beware: It’s Time to Rewrite Your Sick Leave and PTO PoliciesAct Now Advisory April 16, 2015
By now, most employers have heard about California’s new paid sick leave law, AB 1522, technically known as the Healthy Workplace, Healthy Families Act, which will be codified at Labor Code sections 245 to 249 and 2810.5. Many employers with existing sick leave and/or paid time off (“PTO”) policies reflexively believe that their policies already comply with AB 1522, but this may not be the case. While the basic requirements of AB 1522 are clear enough, there are a number of provisions that some employers may have overlooked. The practical effect of this new law is that almost every employer in California will have to rewrite its current sick leave and/or PTO policies. AB 1522 may be the most significant new California employment legislation since the California Legislature made duty-free meal periods a statutory obligation (with attendant penalties) in 1999.
This Advisory will highlight various points in the new law that will likely require employers to revise their current sick leave and PTO policies and practices.
AB 1522 requires all employers with at least one employee in California to allow their employees to accrue sick leave at a rate of at least one hour for every 30 hours worked. Thus, part-time and temporary employees are covered. While the new law took effect on January 1, 2015, employees do not start accruing sick leave under the law until July 1, 2015. Employees are entitled to paid sick leave if they work at least 30 days in one year from their date of hire and can begin using accrued sick leave beginning on the 90th day of employment. It is presumed that, under the new law, an employee must work at least 30 days in each successive year of employment to continue accruing sick leave, but AB 1522 is not clear on this point.
There are different caps for the use and accrual of sick leave. AB 1522 allows, but does not require, employers to cap the accrual of sick leave at 48 hours or six days of total time. The new law also allows, but does not require, employees to cap the use of sick leave to 24 hours or three days in each year of employment.
Employees may use sick leave for the diagnosis, care or preventative care, or treatment of an existing health condition of the employee or the employee’s “family member,” which includes a parent, parent-in-law, child, spouse, registered domestic partner, sibling, grandchild, or grandparent. Employees may also use sick leave for a variety of reasons, such as for being a victim of domestic violence, sexual assault, or stalking.
And, of course, no new California employment law would be complete without anti-retaliation provisions and the imposition of significant penalties on employers for violations. AB 1522 prohibits employers from denying an employee’s right to use accrued sick leave. Also, the new law bars employers from discharging, threatening to discharge, demoting, suspending, or in any manner discriminating against employees for using accrued sick leave, attempting to exercise the right to use accrued sick leave, filing a complaint with the Labor Commissioner, or cooperating in any investigation or prosecution of an alleged violation. In addition, there are monetary penalties associated with failing to comply with virtually any provision of the law.
The new law is clear that employers with existing PTO policies that provide for the accrual and use of time off that is at least equivalent to the requirements of AB 1522 do not need to provide additional paid sick leave. That is precisely why many employers may mistakenly assume that they do not need to make any changes to their existing policies.
Provisions That May Require Revisions to Current Policies
Determining who is entitled to sick leave. Many employers will need to revise their current policies to broaden the scope of employees who are entitled to accrue and use sick leave under the new law. Employer policies commonly provide paid sick leave only to full-time employees or employees who work a certain minimum number of hours per week. AB 1522 requires employers to offer sick leave to any employee who works more than 30 days in a year in California. While not explicit, presumably this does not mean 30 full-time days but would include any work performed over any 30 days in one year from the commencement of employment—after all, one of the explicit policies behind AB 1522 is to provide paid sick leave to “nearly every worker in California.” Thus, under the new law, virtually all part-time, temporary, per-diem, and even many seasonal employees are covered. (There are limited exceptions for employees subject to collective bargaining agreements that provide for paid sick leave and contain certain other specified provisions, providers of publicly funded in-home support services, and employees employed by an air carrier as a flight deck or cabin crew member who receive PTO at least equivalent to that required by AB 1522.)
The new law also requires employers to provide paid sick leave to employees who are exempt from overtime. Most employers do not provide paid sick leave to exempt employees but instead offer limited, or in some cases unlimited, PTO that may be used for any purpose. Because of the tracking and recordkeeping requirements of the new law, as discussed below, employers will need to track the accrual and use of paid sick leave and/or PTO for exempt employees as well.
Tracking accrual of paid sick leave. The manner in which employees accrue sick leave under AB 1522 will likely create a need for employers to revise their current policies.
Employers may cap total accrual at 48 hours or six days and may cap employees’ use of sick leave at 24 hours or three days per year. Although benefits begin accruing at the date of hire, according to the DLSE, employers may track annual allotments by calendar year, anniversary year, or other 12-month period. The annual usage cap provision raises unanswered questions about how to treat the first partial year of employment, whether employers are using a calendar year or some other method. For example, it is unclear whether employers that prefer to use a calendar year for tracking purposes will need to permit the use of a full 24 hours or three days, if accrued, during the first year of employment, assuming the employee works a partial year. A conservative approach will be to provide up to the full amount for use (if accrued) and to restart the employee’s tracking year on January 1. Equally complicated is using July 1 as the start of the annual tracking year, particularly for employees hired after July 1, 2015, who will begin accruing sick leave on their dates of hire. To the extent that the employer already provides paid leave benefits by one of these tracking systems, the easiest solution may be to use the same annual tracking method for paid sick leave (e.g., calendar year or anniversary date), adjusting for mid-year hires if a calendar-year tracking method is used. Employers should ensure that their policies make clear which tracking year has been adopted.
Other issues may arise for employers because employees accrue sick leave based on the number of hours worked, whereas most employers provide for sick leave or PTO accrual based on the number of days, weeks, or months worked. Under the new law, employees must accrue no less than one hour for every 30 hours worked. This makes it difficult for employers to continue to provide accrual of sick leave based on the number of days worked, unless their employees accrue sick leave in an amount per day that will always exceed the accrual rates required by AB 1522. Because of the hourly accrual rate, employers also must pay careful attention to accrual when employees work overtime, as it is clear that overtime hours count for accrual purposes under the new law.
AB 1522 provides that tracking the accrual and carryover of paid sick leave is not required if employers provide the full 24 hours or three days of sick leave at the beginning of each year, and this would eliminate most, if not all, of the accrual problems described above. There appears to be no significant downside for an employer to elect to front-load paid sick leave in this manner.
Tracking the use of paid sick leave. Most employers provide a certain number of paid sick days per calendar year, rather than providing sick leave that accrues by the hour. Yet, AB 1522 is very clear that not only do employees accrue sick leave by the hour, but employers must allow employees to use sick leave in increments as little as two hours at a time. A “Frequently Asked Questions” (FAQ) webpage, published by the Division of Labor Standards Enforcement (“DLSE”), gives an example of a part-time employee who works six hours per day. If such an employee has accrued 24 hours of paid sick leave and takes three paid sick days, the employer cannot refuse to allow the employee to take an additional six hours of paid sick leave. Thus, where the law refers to “days,” it is only generally referring to an eight-hour workday, but this is not a limitation that allows employers to prohibit part-time employees from using their total 24 hours of accrued leave per year. Thus, employers that provide sick leave by reference to days as opposed to hours or that require employees to use accrued sick leave in full-day increments will have to revise their policies and tracking methods to comply with the new law. In addition, while it is not entirely clear, the DLSE’s FAQ webpage suggests that, where the law refers to 24 hours or three days (or 48 hours or six days), employers should apply whichever is the greater of the two. For example, if an employee works four 10-hour shifts, and his or her employer maintains a 24-hour/three-day usage cap, the employee should be permitted to take three 10-hour days of sick leave.
Additional tracking difficulties will likely arise from the 90-day “probationary period” in AB 1522, particularly during the first few months after July 1, 2015. While employees begin accruing sick leave on July 1, 2015, or their date of hire if hired after July 1, 2015, they are not entitled to use accrued sick leave until they have worked for at least 90 days. For example, any employees hired 90 days or more prior to July 1, 2015, would be entitled to begin using their accrued sick leave on July 1, 2015. For employees hired less than 90 days prior to July 1, 2015, however, tracking accrual and use becomes more complicated. Such employees do not begin accruing sick leave until July 1, 2015, and they would all begin to accrue sick leave at the same rate after that date, assuming they worked the same number of hours per week. But these employees would be entitled to use their accrued sick leave beginning on different dates, because each employee is entitled to use accrued sick leave after working for 90 days.
Doctors’ notes/notice requirements. Many employers require an employee to provide a doctor’s note either before or after he or she takes a sick day in order for the employee to be paid for the time off. While the new law is silent as to whether employers can require doctors’ notes, the “Facts and Resources” bulletin published by the Department of Industrial Relations (“DIR”) states that employees may file a claim with the Labor Commissioner against an employer that denies sick leave “due to a failure to provide details.” The text of the new law states that employees may make an “oral or written request” for sick leave. Further, if the need for sick leave is foreseeable, employees must provide “reasonable advance notification,” although what is “reasonable” is not specified. If the need is not foreseeable, employees can provide notice “as soon as practicable,” presumably meaning soon after the leave has begun. These factors strongly suggest that employers will not be allowed to condition the use of accrued sick leave under the new law on the provision of a doctor’s note or other medical justification. It appears that employers must simply accept an employee’s word that the sick leave is for a purpose permitted by the law.
It may seem incongruous that AB 1522 limits what employees may use accrued sick leave for but, at the same time, denies employers a way to verify that an employee’s use of sick leave is for a permitted purpose. Yet, that is the way the new law is currently drafted, and employers will have to wait for amendments by the Legislature or additional clarification from the DLSE.
Interaction with California’s Kin Care Law and the California Family Rights Act (“CFRA”). Under California’s Kin Care Law, any employer that provides sick leave benefits (either paid or unpaid) to employees must allow employees to use up to one-half of that leave to care for child, parent, spouse, registered domestic partner, or child of the employee’s registered domestic partner who is ill. California employers have likely already modified their sick leave policies to make provisions for such kin care leave. AB 1522, however, allows employees to use all accrued leave to care for a “family member,” and the definition of “family member” adds grandparents, grandchildren, and siblings to the family members described in the Kin Care Law. Thus, AB 1522 entirely displaces the Kin Care Law, at least as to the required amount of sick leave that employees may use and accrue under the Kin Care Law.
Because AB 1522 allows employees to use accrued sick leave to care for a broader range of family members than does the Kin Care Law, employers should be aware that whether an employee’s use of sick leave counts toward the amount that the employee is entitled to use under the Kin Care Law will depend on the family member for whom care is given. To the extent that employers allow employees to accrue paid sick leave beyond that required by AB 1522, it seems defensible that these employers may allow employees to use only half of that additional sick leave to care for the family members specified in the Kin Care Law, rather than the broader list of family members in AB 1522.
The CFRA allows employees to take leaves of absence for their own “serious health condition” or that of a parent, spouse, child, or registered domestic partner. But the CFRA imposes requirements on such leave that are not required by the new paid sick leave law. For example, to determine whether the requested leave is for a proper purpose under the CFRA, employers are allowed to require a medical certification from employees indicating the date on which the serious health condition began, the probable duration of the condition, and a statement that the employee is unable to perform the essential functions of his or her job. As discussed above, however, it appears that employers cannot require such information from employees who request paid sick leave. The CFRA allows an employee to use accrued paid sick leave for the employee’s own serious health condition so that he or she can be paid for at least a portion of a CFRA leave. Employers and employees may mutually agree to use sick leave for other leaves allowed under the CFRA.
If an employee wishes to use paid sick leave accrued under AB 1522 to be paid for at least some of a leave taken under the CFRA, it is unclear whether the employer can require the medical certification permitted by the CFRA. Until further clarity is provided on this point, it would be advisable for employers not to request such documentation if an employee only wishes to use paid sick leave accrued under AB 1522. But employers should be permitted to request such documentation for any sick leave accrued beyond the minimum required by AB 1522.
Paystub requirements. Under the new law, an employee’s paystub (or another document provided to the employee on the employer’s designated payday) must set forth the amount of accrued sick leave that the employee has available. Unless employers want to issue a separate document to each employee at every pay period, this requirement will likely compel many employers to change their paystubs. Employers that use a third-party vendor for their payroll should not assume that their vendor will make the appropriate changes. For example, some paystubs may reflect the amount of sick leave that an employee has used both in the current pay period and the year to date but does not reflect the amount accrued, as required by AB 1522. Accordingly, employers should contact their payroll vendors to ensure that their vendor will timely implement the changes required by the new law.
Discipline for excessive absenteeism. Many employers discipline an employee for excessive absenteeism, including for excessive use of sick days, even if they allow the employee to otherwise accrue and use sick leave. Some employers have policies that allow for the discipline of employees who do not notify management in advance that they will be absent—the so-called “no-call, no-show” rules. Other employers may require employees to find a replacement to cover their scheduled shifts as a condition to allowing them to use sick leave. Such policies will need to be revisited in light of AB 1522.
Requiring employees to find a replacement worker is expressly forbidden by AB 1522. In addition, the new law clearly states that employers may not discharge, threaten to discharge, demote, suspend, “or in any manner discriminate against” an employee for using accrued sick leave. As previously mentioned, the DIR’s “Facts and Resources” bulletin states that employees may file a complaint if they are denied sick leave “due to a failure to provide details.” This suggests that employers should not consider an employee’s use of sick leave accrued under AB 1522 when disciplining employees for excessive absenteeism or failing to report an unforeseeable absence within a specific period of time. Employers that issue discipline based on a specified number of absences over a specified period of time should only consider absences for reasons other than paid sick leave under AB 1522.
Interaction with local sick leave laws. Several cities have enacted their own sick leave legislation. AB 1522 provides that, if the employer is subject to a local sick leave law, it must comply with the law that is more generous to the employee. Employers subject to local sick leave laws will have to compare the local law with the requirements of AB 1522 in order to ensure that they are applying the most generous provision in each law. For example, in 2007, San Francisco implemented the San Francisco Paid Sick Leave Ordinance, under which the accrual caps are more generous than under AB 1522, but the range of family members for whom an employee may use sick leave to care for is more limited than under AB 1522.
Written policies and recordkeeping. Some employers may allow employees to take sick leave without a detailed written policy. AB 1522 requires all employers to post a notice containing certain specified information about the new sick leave law (a paid sick leave poster meeting these requirements is available on the DLSE’s website). In addition, the new law requires employers to provide all employees hired after January 1, 2015, with a specific Notice to Employees (which is also available to download from the DLSE’s website).
For employees hired prior to January 1, 2015, an employer must provide them with written notice of any changes to its sick leave policies within seven days of the actual change. Effectively, therefore, the latest that an employer may provide such notice would be July 8, 2015, seven days after the operative accrual date in AB 1522. Employers with existing policies that meet all the requirements of AB 1522 still must provide written notice to employees outlining the specific requirements of the new paid sick leave law, even if the policy is in writing. The DLSE’s FAQ webpage encourages employers to ensure that employees are made fully aware of the terms and conditions of their sick leave policies, including how any existing policy differs from the requirements of AB 1522. For this reason, it makes sense for employers to put their sick leave policies in writing.
AB 1522 also imposes additional recordkeeping requirements on employers. For instance, employers must maintain for three years all records documenting hours worked, paid sick days accrued, and paid sick days used. And such records must be made available to employees, upon request.
Special issues regarding seasonal employees. Unless required by another law, most employers likely have not provided paid sick leave to seasonal employees. However, seasonal employees are clearly covered by AB 1522, which will pose special tracking problems. Under the new law, if an employee separates from an employer for any reason and is rehired within one year, all previously accrued and unused sick leave must be restored to the employee. But this reinstatement obligation does not apply if the employer allows the employee to “cash out” his or her sick leave at the time of separation. In addition, time worked during the first period of employment counts toward the 90-day probationary period. Thus, if an employee works for 60 days, and then returns to the same employer within one year, the employee would be eligible to begin using accrued sick leave after working 30 days.
What Employers Should Do Now
- Review your current sick leave or PTO policies with the above issues in mind.
- Review any absenteeism policies to ensure that employees are not disciplined for taking paid sick leave under AB 1522.
- Review and, if needed, modify paystubs to make sure that they will reflect both the accrual and the use of paid sick leave or PTO as of July 1, 2015, or talk to your payroll vendor to ensure that the paystubs will be modified correctly.
- Post a paid sick leave poster prior to July 1, 2015.
- Before subjecting an employee to discipline or other adverse employment action (or even threatening to do so), determine whether the employee has engaged in protected conduct under AB 1522 within the preceding 30 days (i.e., filed a claim with the Labor Commissioner, cooperated in an investigation or prosecution, or opposed any policy or practice prohibited by the new law). If any such protected conduct has taken place, consider waiting until at least the 31st day after such protected conduct before taking the adverse action. This will avoid creating a presumption of retaliation.
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