By Judith Droz Keyes, Janet Grumer, and M. Michael Cole
On July 13, 2015, California Governor Jerry Brown signed into law urgency legislation amending the Healthy Workplaces, Healthy Families Act of 2014. which generally requires employers to provide paid sick leave to almost all California employees. Our prior client advisories regarding this law can be found here and here. The law generated a multitude of questions due, in no small part, to its lack of clarity. The new amendments are effective immediately. They provide important clarifications and changes that should help employers comply with the law. Nonetheless, some ambiguities and open questions remain. The following is a summary of the key changes.
Clarification to Eligibility Requirements
Revision to Accrual Methods
Under the law, employees are entitled to earn, at least, 1 hour of paid sick leave time for every 30 hours worked, up to a cap of 48 hours. However, because employers are entitled to cap sick leave usage at 24 hours or 3 days per year, the original law provided that employers could satisfy the accrual requirement by granting that amount of paid sick leave up front. The amendments clarify that employers who use this front-loading method can grant this amount of leave at the beginning of each calendar year, each year of employment, or any other 12-month period, and that it need not be available to new hires until the 120th day of employment.
The amendments also create an additional method to satisfy the accrual requirements. Employers can use an accrual method different from the 1 hour for every 30 hours worked formula provided (i) the accrual is on a regular basis (e.g. a week or a month, or each pay period) and (ii) the accrual rate results in employees having no less than 24 hours of accrued sick leave (or paid time off) by the 120th calendar day of employment, or every calendar year or 12-month period. For example, employers who provide paid time off that accrues on a weekly or monthly basis (regardless of hours worked) would now be allowed to continue to use that method provided the accrual rate is no less than 1.4 hours per week.
Calculating Sick Pay
With the amendments, employers may also calculate sick leave pay for non-exempt employees in the same manner as they would calculate the regular rate of pay for overtime purposes for the workweek in which the employee uses paid sick leave, which is also referred to as the “weighted average” method. Alternatively, employers still can calculate sick leave pay for a nonexempt employee by dividing the employee’s total wages (not including overtime) by the total hours worked in the full pay periods of the prior
90 days of employment. For exempt employees, sick leave pay is to be calculated as the employer calculates other forms of paid leave time, such as vacation.
Under the law, employers must reinstate accrued, but unused, sick leave time to employees who terminate but are rehired within one year from their date of separation. The amendments clarify that employers need not reinstate any accrued sick leave time that was paid out at the time of termination, which may occur, for example, when paid sick time and vacation time are combined into a single paid time off bank that is required to be paid out at termination.
Record Keeping Requirements
The law establishes certain obligations with respect to maintaining records of accrued and used paid sick days. The amendments clarify that employers are not obligated to maintain records regarding the purposes for which an employee uses paid sick leave or paid time off.
Unlimited PTO Policies
Under existing law, employers are required to provide on each payday written notice to employees of the amount of paid sick leave they have available. This can be done either on the itemized wage statement or in a separate writing provided to the employee on pay day. This requirement created ambiguity for employers who provide unlimited paid time off as a number of employers now do for exempt employees. The amendments clarify that if an employer has an unlimited paid sick leave or paid time off policy, it may satisfy its reporting obligation by indicating on the wage statement or separate writing that the available time is “unlimited.”
- Is the 30-day eligibility requirement a reference to work days or calendar days?
- Does the reference to “3 days or 24 hours” mean that an employer must provide the greater of 3 days or 24 hours? For example, part-time employees who work less than 8 hours per day still would be entitled to 24 hours (more than 3 days) of leave under such a reading, while employees who work 10-hour days would be entitled to 30 hours (3 days) of leave. In their existing FAQ’s, the Division of Labor Standards Enforcement (“DLSE”) seems to take this view of the statute.
- With respect to the new safe harbor provision, would employers who have already updated their policies in order to comply with the law before it was amended be allowed to revert to their old plans’ accrual method?
The DLSE is currently updating its FAQs, so we hope to have more guidance shortly. Given the complexity of the law, however, prudent employers should continue to seek guidance from counsel to ensure they are in compliance.
Category: Payday loans