California Employers Must Provide Paid Sick Leave Benefits to Most Employees

California Employers Must Provide Paid Sick Leave Benefits to Most Employees

By Sharon Ongerth Rossi and Virginia K. Young

As a result of the Healthy Workplaces, Healthy Families Act of 2014 (the “Act”), as of July 1, nearly all employers—regardless of size—must provide paid sick days to employees in California.

Under the Act, both full and part-time, exempt and non-exempt employees who work in California for 30 or more days within a year, must either accrue paid sick leave at a rate of one hour per 30 hours worked at the outset of their employment (the “accrual” method) or be provided with an up-front award of at least 24 hours or three full work days of paid sick leave at on an annual basis, i.e., based on calendar year, anniversary date, etc. (the “award” method). Under this method, the full amount of accrued leave must be available to the employee at the beginning of the 12–month period.

Employers should note that although the Act is similar to both the San Francisco paid sick leave ordinance (in effect since 2007) and the Oakland paid sick leave ordinance (in effect since March 2, 2015), there are some differences. (For example, the San Francisco ordinance only requires sick leave accrual after 90 days of employment, whereas the Act requires that employees begin to accrue or be awarded sick leave at the outset of their employment). Employers with employees working in these localities will have to comply with all applicable local ordinances as well as the Act, and in the case of differing provisions, must apply those that are more generous to the covered employees.

Carry Over of Accrued Benefits and Caps on Accrual

Under the accrual method, unused sick days must carry over from year to year. An employer may, however, limit an employee’s use of paid sick days to a total of 24 hours or three full work days (assuming a standard eight hour day) in each year of employment. Employers may also cap accrual at 48 hours or 6 full work days. (The San Francisco and Oakland ordinances provide employees with a higher cap and do not permit employers to limit the amount of sick leave taken in a year).

Some employers may prefer applying the award method because sick leave does not need to carry over from year to year under this method. But, if the employer includes sick leave as part of a Paid Time Off (PTO) policy such that employees can use the time off for other personal reasons like vacation, unused leave must always be carried over from year to year (even under the award method) to ensure compliance with Labor Code section 227.3, as interpreted by the California Supreme Court in Suastez v. Plastic Dress-Up Co., 31 Cal. 3d 774 (1982). It is also important to note that accrued unused PTO, unlike sick leave, must be paid when employment ends.

Use of Sick Leave Benefits

Regardless of whether the employer choses the accrual or award method, employers can opt to limit the use of paid sick leave until after 90th day of employment in the case of new hires. Under the Act, the term “family member” is broadly defined to include a child (including biological, foster or stepchild, legal ward, or a child to whom the employee stands in loco parentis), parent (including biological, foster or stepparent, legal guardian of an employee or that of the employee’s spouse or registered domestic partner, or a person who stood in loco parentis when the employee was a minor child), spouse, registered domestic partner, grandparent, grandchild, or sibling. Notably, California’s Kin Care law (Labor Code section 233), which requires that employers permit employees to use a portion of their sick leave to care for sick family members, does not include siblings, grandparents or grandchildren.

Employees must be able to use paid sick days for the diagnosis, care, or treatment of an existing health condition, or preventive care for an employee or an employee’s family member. Additionally, paid sick days may be used by an employee who is a victim of domestic violence, sexual assault, or stalking.

The Act dictates that employees have the right under the law to determine how much sick leave they can use at a time. Nonetheless, employers can set a reasonable minimum increment, not to exceed two hours. In other words, under the Act, employers can require that employees use at least two hours of sick leave at a time, but no more. (The San Francisco and Oakland ordinances are more restrictive in this regard and prohibit employers from requiring that sick leave be used increments greater than one hour at time).

Rates of Pay When Using Sick Leave

Under the Act, employees must be paid their regular hourly rate in effect at the time the sick leave is used. However, if within 90 days prior to the taking of sick leave, the employee was paid a different hourly rate, paid by commission or piece rate, or was a non-exempt salaried employee, then the sick leave rate of pay is calculated by dividing the employee’s total wages (not including overtime premium pay) by the total hours worked in the full pay periods of that 90 day period.

Employers are not required to pay accrued unused paid sick days upon termination of employment. (However, employees who have instituted PTO policies must pay out all accrued but unused leave upon termination of employment in order to comply with Suastez). In addition, under the Act, if an employee separates from an employer and is rehired within one year of the separation date, all previously accrued but unused sick leave must be reinstated.

Notice and Record Keeping Requirements

The Act also imposes specific notice and recordkeeping obligations on employers, some of which went into effect January 1, 2015, including conspicuously displaying a poster notifying employees of their rights under the law at each worksite. In addition, employers must now use a new Wage Theft Prevention Act (Labor Code section 2810.5) Notice which contains information on the paid sick leave law for all non-exempt employees. Because Labor Code section 2810.5 requires non-exempt employees to receive new notice forms when changes are made, the new 2810.5 notice must be given to current non-exempt employees, not just new hires, by July 8. Both the required poster and 2810.5 Notice can be found on the DLSE website.

Finally, as of July 1, employees must be informed in writing of how much paid sick leave is available with each paycheck.

Anti-Retaliation and Enforcement

Employers should pay particular attention to the anti-retaliation provision of the Act, which provides for a rebuttable presumption of unlawful retaliation if, an employer: (a) denies an employee the right to use accrued sick days, (b) discharges, threatens to discharge, demotes, suspends, or (c) in any manner discriminates against an employee within 30 days of an employee (1) filing a complaint with the Labor Commissioner or alleging a violation of the paid sick leave law, (2) cooperating with an investigation or prosecution of an alleged violation of the sick leave law, or (3) opposing a policy, practice, or act that is prohibited by the sick leave law. The Labor Commissioner is charged with enforcing the Act, and can award reinstatement, back-pay and penalties in addition to the amount of sick days withheld. The Labor Commissioner can also bring a civil action on behalf of an aggrieved employee. While the Act does not specifically provide employees with a right to bring an action in court, employees may also pursue a civil court action for sick leave violations under the Private Attorney General Act, Labor Code section 2698 et seq.

Pending Amendments to the Law

Employers should also be aware that there are several significant proposed amendments currently pending in the legislature, with a scheduled Senate committee hearing on July 8. Because the amendments include an “urgency clause,” should they pass in the Senate and should Governor Brown sign the law, they will become immediately effective.

For the most part, the proposed amendments clarify the law and provide employers with more flexibility in terms of implementing the law in practice. For example, under the current version of the Act, both full-time and part-time, exempt and non-exempt employees who are employed in California for 30 days or more within a year from the commencement of employment are entitled to sick leave benefits. The pending amendments clarify that to be eligible for sick leave an employee must be employed by the same employer for 30 days or more.

In addition, the pending amendments would expressly permit employers to apply a different accrual method (other than one hour per every 30 hours worked) so long as the accrual is on a regular basis and ensures that the employee receives at least 24 hours or three days of paid sick leave by the employee’s 120th calendar day of employment each calendar year or in each 12-month period. Alternatively, the employer could satisfy the law’s accrual requirements by providing not less than 24 hours of accrued sick leave or paid time off for employee use by the 120th calendar day of employment.

Significantly, under the current version of the Act, employers with sick leave or paid time off policies do not need to grant employees with additional sick leave so long as the policy makes an available paid leave benefits that can be used for the same purposes and under the same conditions as required by the law and (1) satisfies the accrual, carry over and use requirements of the law, or (2) provides at least 24 hours or three days of sick leave (or equivalent paid time off) for an employee to use each calendar year of employment, calendar year or on a 12-month basis. The proposed amendments alter this second prong such that employers with existing policies that do not otherwise satisfy the accrual carry over or use requirements of the law will be exempt from granting additional leave to their employers only if: (a) their policy was in place prior January 1, 2015, (b) paid time off benefits accrue on a regular basis, (c) employees, including those hired after January 1, 2015 earn at least one day or eight hours of paid time off benefits within three months of employment each calendar year or each 12-month period, and (d) earn at last three days or 24 hours of sick leave or paid time off within nine months of employment.

With respect to calculating sick leave pay, the proposed amendments provide that in the case of non-exempt employees, the rate of pay can also be calculated either by (1) calculating what the regular rate of pay for overtime purposes would be during the particular workweek (whether or not that employee actually works overtime in that work week); or (2) 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. In the case of non-exempt employees, the proposed amendments provide that the rate of pay can be calculated in the same manner that employer calculates wages for other forms of paid leave time.

Finally, the proposed amendments provide, that in the case of an employer who has “unlimited” sick leave or paid time off policy, the requirement to notify employees in writing with each paycheck of how much paid sick leave is available to them can be satisfied by simply indicating on the employee’s itemized wage statement (or other equivalent document) that they have an “unlimited” amount of leave available. This is significant because the DLSE has taken the position that under the current Act, employers with unlimited paid time off policies must separately track sick leave accrual and use.

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Employers should carefully review their sick leave policies and practices as this Act (and any amendments) will likely require most California employers to make adjustments to comply with this law and any applicable local sick leave ordinances. We will continue to monitor the pending amendments and issue a new alert if and when the amendments are passed. If you employ workers in California and have questions on how this law will affect you, please contact Rogers Joseph O’Donnell.

RJO’s Labor & Employment Law Practice Group is comprised of experienced labor and employment attorneys who regularly represent and advise employers, big and small, in a wide variety of industries.

The content of this article is intended to provide a general guide to the subject matter, and is not a substitute for legal advice in specific circumstances.