Last year, California became the first state in the nation to pass a law requiring employers to provide paid sick leave to most employees. Portions of the new law became effective on January 1, 2015 and the remainder became effective on July 1, 2015. The law included some confusing provisions, however, and prompted many questions and comments from employers. Last week, the Legislaturee passed an amendment to the new law as urgency legislation that became effective immediately.
Perhaps the most significant change relates to the manner in which employers must pay employees during sick leave. Under the original version of the law, sick leave was paid at each employee’s regular hourly rate, and exempt employees were presumed to work 40 hours per week. For employees paid on a commission or piece rate basis, the applicable rate of pay was equivalent to the employee’s total wages over the previous 90 days divided by the number of hours worked. Under the law as amended, employers must pay non-exempt employees at the regular rate applicable during the workweek in which the employee uses sick leave. For exempt employees, sick leave pay is calculated in the same manner as pay during other forms of paid leave (such as vacation or Paid Time Off). The amendments also delete provisions in the original law addressing the calculation of sick leave for employees paid on a commission or piece rate basis. Many existing paid sick leave policies describe the calculation of sick leave pay utilizing the original terms of the law, so such policies should be revised as soon as possible.
The amendments also change the rules regarding accrual of sick leave. Employers may elect to grant sick leave using either an accrual method or a lump-sum method. As originally enacted, the law required employers utilizing the accrual method to grant one hour of paid sick leave for every 30 hours worked. The amendments now permit employers to utilize alternative accrual methods as long as the method chosen provides for accrual on a regular basis and accrual of no less than 24 hours of sick leave by the employee’s 120th day of employment.
The amendments also contain a “grandfather clause” that permits employers to maintain certain sick leave or Paid Time Off policies that existed prior the enactment of the new law. Pursuant to the amendments, previously existing policies may satisfy the requirements of the new law if they (a) were effective prior to January 1, 2015, (b) permit accrual of sick leave or PTO on a regular basis, and (c) provide for accrual of at least eight hours of sick leave within the first three months of employment each calendar year and 24 hours of sick leave within the first nine months of employment.
The amendments also include a number of technical clarifications. The most significant technical clarifications include the following:
- Clarification of 30-day eligibility rule – The amendments clarify an ambiguity in the law by confirming that employees must complete 30 days of work in California with the employer in question within a year of the start of employment in order to be eligible for paid sick leave.
- Implementation of cap – The amendment clarifies that the limitation employers can impose on the use of paid sick leave (24 hours or three days per year) can be measured based on calendar years, the employee’s date of hire, or any 12-month period.
- Reinstatement of sick leave upon rehire – The original version of the law required employers to reinstate balances of unused sick leave for employees who were re-hired within a year after the conclusion of their employment. The amendment confirms that employers are not required to reinstate balances of unused sick leave or Paid Time Off if the employer paid the employee for the unused balance at termination (as would be required with Paid Time Off).
- Tracking of “unlimited” sick leave – Employers must notify employees in writing (through pay stubs or separate documents on each pay day) of the amount of sick leave available to them. The amendments clarify that employers who allow unlimited sick leave or Paid Time Off may report sick leave as “unlimited” on wage statements.
The new sick leave law has prompted many questions that are beyond the scope of this Advisory, including some still unresolved by the recent amendment. Employers should also recognize that some cities, such as San Francisco and Oakland, have enacted their own local sick leave ordinances. Employers that are subject to local ordinances must comply with both the new state law and all applicable local laws, meaning that employees will typically enjoy the benefits of the most generous provisions of each law.
What Should Employers Do Now?
- Revise policies that calculate sick leave pay based on language from the original version of the law – Many sick leave policies based on the new law include provisions calling for sick leave pay to be calculated based on rules that have been abolished by the amendment. Employers with such policies should confer with counsel and revise them as soon as possible.
- If you don’t have a policy regarding sick leave – Employers that have not adopted policies regarding sick leave (or paid time off) should immediately create and implement policies that comply with the requirements of the law.
- Comply with notice and posting requirements – Apart from requiring employers to provide paid sick leave to employees, the new law also imposes notice and posting requirements, and those requirements became effective as of January 1, 2015. Employers that have not taken action to comply with these requirements should do so immediately.