New Amendment to the California Paid Sick Leave Law
Last year, California enacted the Healthy Workplaces, Healthy Families Act of 2014 (“the Act”). With a few limited exceptions, the Act required employers (regardless of size) to begin providing at least 3 days or 24 hours of paid sick leave to its employees (full time, part time or temporary) who on or after July 1, 2015, worked 30 or more days in California. Employers may implement this entitlement using either the “accrual method” or the “front loaded” method.
In response to a number of questions raised by the Act, on July 13, 2015, Governor Brown signed into law SB 304, a “clean-up” amendment (“the Amendment”) that became effective immediately. The purpose of the Amendment was to clarify or correct several of the ambiguities contained in the Act. Significant provisions of the Amendment are as follows.
(1) The Act provided that to be eligible for paid sick leave, an employee must work at least 30 or more days in California, but not necessarily perform this work for the current employer. The Amendment clarifies that an employee must work 30 or more days in California for the current employer in order to be eligible for paid sick leave.
(2) The Act states the if an employer uses the accrual method, the employee must accrue one hour of paid sick leave for every 30 hours worked. The Amendment provides a new option which allows an employer to use any other accrual method as long as it provides for accrual on a regular basis, and an employee will have no less than 3 days or 24 hours of accrued sick leave available by the 120th calendar day of employment (new employees), or each calendar year or in each 12-month period (existing employees). So, for example, this allows an employer to measure accruals based on pay periods or any other accrual method as long as it meets the above requirements.
(3) The Act requires, under the accrual method, that employees carry over unused accrued time from year to year. However, the Act permits employers to cap an employee’s ability to accrue additional time once the employee accrues 6 days or 48 hours. The Act also allows employers to limit an employee’s use of paid sick time. The Amendment clarifies that the limit is 3 days or 24 hours each year of employment, calendar year or 12-month period.
No accrual or carry-overs are necessary if the employer elects to “front load” the 3 days or 24 hours. The Amendment clarifies that under the “front load” method, an employer satisfies its obligations under the Act if the employee is given the full amount of leave at the beginning of each year of employment, calendar year, or 12 month period, and the Amendment clarifies that “full amount of leave” means 3 days or 24 hours.
(4) The Act requires an employer to provide an employee with written notice of the amount of paid sick leave available, or paid time off (PTO) an employer provides in lieu of sick leave. The Amendment permits an employer, who provides unlimited sick leave to its employees, to satisfy the notice requirements by indicating “unlimited” on the employee’s itemized wage statement.
(5) The Act requires an employer to reinstate unused accrued paid sick time to an employee who is rehired within one year of separation from employment. The Amendment clarifies that if the employer cashed out the employee for the unused sick time upon separation from employment (which is not required by the Act or the Amendment) or cashed out unused accrued PTO upon separation (which is required under California law), the employer is not required to reinstate the cashed out time if the employee is rehired within a year of separation.
(6) Under the Act, in the event an employee’s rate of pay varies, for example, due to receiving commissions or being on a piece rate, the employer was required to calculate the rate of pay for paid sick leave based on the employee’s average earnings in the previous 90 days. The Amendment provides three options for calculating the rate paid sick leave time:
For non-exempt employees, an employer may (a) calculate the paid sick leave in the same manner as the regular rate of pay for the workweek in which the employee used the sick leave regardless of whether the employee worked overtime in that workweek; or (b) divide the employee’s total wages (not including overtime premium pay) by total hours worked in the full pay periods of the prior 90-days of employment; (c) for exempt employees, the employer will calculate paid sick leave in the same manner as the employer calculates wages for other forms of paid leave time.
(7) The Act did not require an employer to provide additional paid sick days if the employer had an existing paid sick leave policy or PTO policy, the employer made available an amount of leave for specified uses and the policy either satisfied specific accrual, carry over, and use requirements or provided no less than 3 days or 24 hours of paid sick leave for each year of employment or calendar year or 12-month basis.
The Amendment “grandfathers” PTO or paid sick leave policies that were in effect before January 1, 2015 and allows employers to use them going forward for current and new employees if the pre-existing policy meets the following requirements:
(a) It provided for accrual on a regular basis;
(b) An employee earned 1 day or 8 hours of PTO or sick leave within the completion of 3 months of employment, each calendar year or each 12-month period; and
(c) The employee earned at least 3 days or 24 hours of PTO or sick leave within the completion of 9 months of employment.
If an employer changes a grandfathered policy to lower employee accruals it will lose the grandfathered status and accrual requirements under the Act and Amendment will then apply going forward. However, the employer may change the grandfathered policy to increase the accrual rates and thus make it more generous than the requirements under the Act and Amendment.
Since the Amendment became law 12 days after the July 1, 2015 deadline for employers to comply with the Act, some of the changes may be too little, too late. For example, employers electing the accrual method presumably changed their payroll procedures to accrue one hour for every 30 hours worked prior to the Amendment’s option of allowing alternate accrual methods and may not wish to make yet another change in accrual procedures. Moreover, the Act and Amendment still contain ambiguities, and some say that the Amendment may have created more uncertainties. The Department of Industrial Relations (DIR) recently suggested that it may provide guidance on implementation through its Frequently Asked Questions (FAQ) section of the DIR website. In the meantime, the best practice for employers is review their current paid sick leave policies, even if they did so to comply with the July 1 requirements of the Act, and consider their policies in light of the the new options and changes made by the Amendment.