California Mandates State,Wide Paid Sick Leave Law

On 10 September 2014, California Governor Edmund G. Brown, Jr., signed into law the Healthy Workplaces, Healthy Families Act of 2014 (“California Paid Sick Leave Act”), with an effective date of 1 January 2015.  AB 1522 adds Labor Code Sections 245-249 and amends Section 2810.5 and requires California employers to provide paid sick leave to employees who work a certain number of days and hours.  California becomes the second state in the nation to mandate paid sick leave to employees.  In addition to the state mandate, several California cities have also mandated their own paid sick leave laws.
 
This article addresses and summarises the basic elements of the new Paid Sick Leave law, what is required, the notice and record-keeping provisions.
 
Covered Employers and Employees
 
This law applies to employers if it has at least one employee who has worked more than 30 days in a year in the state of California.  All employees who work more than 30 days in a year in California are also covered.  This includes all part-time, seasonal and temporary employees such as student workers, substitutes, playground aides, walk-on athletic coaches and after-school employees.  If these so called “casual” employees work 30 calendar days, they will be entitled to some form of sick leave under this new law.
 
Exemption from Coverage
 
Employees who are not covered under this new law are those who have a valid collective bargaining agreement that provides paid sick leave and other provisions, employees in the construction industry covered by a collective bargaining agreement, providers of in-home supportive services, and individuals employed by an air carrier as a flight deck or cabin crew member, provided they receive compensatory time off.
 
How Sick Leave is Calculated
 
Under this new law, there are two ways in which employees may earn or have paid sick leave.  The first way is the accrual method and the second way is the front-loading method.  Each method, its caps and usage, is discussed below.
 
The Accrual Method
 
Under the law, employees may accrue one hour of sick time for every 30 hours worked, including all overtime hours.  Employees first become eligible to accrue paid sick time starting on 1 July 2015, but they will not accrue paid sick time until they have worked in California for 30 days within one year from 1 July 2015, or from their first date of hire, whichever is later.  An employer may, but is not required, to “lend” to an employee in advance of accrual at the employer’s discretion and with proper documentation.
 
For example, if an employee was hired before 1 July 2015, the earliest that accrual will begin is 31 July 2015.  This assumes that the employee works every day in July. 
 
If you have exempt employees, they will be deemed to have worked 40 hours per week for purposes of accruing sick leave.  However, if their actual normal workweek schedule is less than 40 hours, employers may require those exempt employees to accrue sick leave based on that normal workweek.
 
The Front-Loading Method
 
In lieu of using the accrual method based on the formula calculated above, an alternate formula allows employers to “front-load” 24 hours of paid sick leave to the employee at the beginning of each year.  With the front-loading method, employers may avoid calculating accrual and carryover formulas.  As such, for those employers interested in using the front-loading method, the employer would front-load 24 hours of paid sick leave into their sick leave bank upon the first day of employment.  Such front-loading method does not have any carryover rights, and any unused leave at the end of the year is forfeited.  Because they are entitled to 24 hours each year, the employers would have to front-load each employee with 24 brand new hours of paid sick leave each year. 
 
90-Day Waiting Period of Usage of Any Paid Sick Leave
 
The law allows employers to impose a 90-day waiting period before any accrued sick leave can be used.  As such, an employee must be employed for at least 90 days before employees may be able to use any accrued sick leave. 
 
If in the 90 days of employment before taking accrued sick leave the employee had different hourly rates or was a nonexempt salaried employee, the rate of pay is calculated by dividing the employee’s total wages (excluding overtime premium pay) by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.
 
Limits on Usage and Carryovers
 
This section discusses how the employers may limit the employee’s usage of paid sick leave, and how much sick leave can carry over into the following year.
 
Limit on Sick Leave Usage
 
Employers may limit an employee’s use of paid sick leave to 24 hours (or three days) in each year of employment.  Even though the law allows the employee to conceivably accrue more than 24 hours in a year of sick leave, the new statute allows the employer to limit its usage to 24 hours.  As such, if you have employees working full-time who are subject to this new statute, it is conceivable that those employees will accrue more than 24 hours of sick leave in one year.  Despite this, employers may limit the usage to 24 hours, although it is not mandatory.  For those employers using the front-loading method in which you are “fronting” 24 hours of paid sick leave, you can still limit the employee’s usage to 24 hours in a year.  In essence, those employers using the front-loading method will front-load 24 hours in each year, and limit the employee’s use to 24 hours in each year.  As discussed in Section B below, those using the front-loading method are not required to permit employees to carry over front-loaded paid sick leave hours. 
 
Carryover of Sick Leave
 
The law permits employers to put a maximum cap on the amount of sick leave that can be carried over from year to year.  This cap is 48 hours.  This carryover provision only applies to those employers utilising the accrual method of sick leave.  Accordingly, if you have employees accruing sick leave of more than 48 hours in one year, employers may limit that carryover to 48 hours only. 
 
As an example, employee “A” works 2,040 hours in a year.  Using the accrual method, employee “A” accrues 68 hours of paid sick leave.  At the end of the first year, the employer may limit employee “A’s” carryover of sick leave to 48 hours.  Employee “A” would then lose 20 hours of paid sick leave.  Starting in year two, employee “A’s” sick leave bank will have 48 hours of sick leave, and he will continue to accrue sick leave at the formula of one hour for every 30 hours worked.  Carryover requirements are not required for those employers using the front-loading method. 
 
As another example, “XYZ” “front-loads” 24 hours of sick leave for all seasonal employees.  At the end of the year, if the employees do not use all 24 hours, they lose that sick leave, and they are “front-loaded” another 24 hours for the following year.  There is no carryover of sick leave for those employers using the front-loading method. 
 
With both the accrual and front-loading method, employees who separate with an employer and are re-hired within one year by the same employer must have their accrued but unused sick-leave bank reinstated and be allowed for immediate use.  In addition, an employer has no obligation to allow an employee’s total accrual of paid sick leave to exceed 48 hours or six days, so long as the employee’s ability to accrue and use sick leave under this new law is not otherwise limited. 
 
What if My Employer Already Provides Paid Sick Leave?
 
The new law acknowledges and takes into account that many employers already provide paid time off for reasons specific in this new law.  As provided in Section 246(e), an employer is not required to grant additional paid sick leave if the employee has a paid leave or paid time off policy that makes available an amount of leave that may be used for the same purpose and under the same conditions as specified in the law and the policy does either of the following:
 
1. Satisfied the accrual, carryover and use requirements of the law;
2. Provides no less than 24 hours or three days of paid sick leave or equivalent paid time off for use for  each year of employment or calendar year or 12-month basis.
 
Permitted Use of Sick Leave Under this Statute
 
Employers must allow employees to use paid sick time for the following purposes:
 
A. Diagnosis, care, or treatment of an existing health condition of, or preventive care for, an employee or an employee’s family member.[1]
B. For an employee who is a victim of domestic violence, sexual assault, or stalking. 
 
In addition, employers may require employees to use sick leave in a reasonable minimum increment not to exceed two hours.  For example, employers may establish a policy that employees who take sick leave under this statute must take it in a minimum of two hours.  Two hours is only the maximum, and as such, employers can set a lower minimum standard, and require employees to use sick leave in minimum increments of less than two hours, but in any event, employers may not set a minimum usage of more than two hours.
 
If the employer’s current sick leave policy already provides more than 24 hours or three days of sick leave but the policy does not permit the employee to take sick leave for any of the reasons specified in the statute, it is suggested that the employer amend its policy on its use to allow employees to use sick leave for all of the family members identified in the law and for domestic violence.
 
Notice Requirements
 
How much notice must an employee give in order to use paid sick leave under this new law?
 
Sick leave must be given to an employee upon the employee’s oral or written request.  If the need for leave is foreseeable, the employees must provide “reasonable advance notification.”  The statute, however, is silent as to what constitutes “reasonable advance notice.”  If the need for sick leave is unforeseeable, an employee must provide the employer with notice as soon as practicable.  This is also undefined under the statute, and employers should proceed with caution, should they decide to discipline an employee who did not provide, in the employer’s opinion, reasonable advance notice or notice as soon as “practicable.” 
 
The statute is also silent as to whether or not employers are permitted to require reasonable documentation that the sick leave was utilised for a covered purpose.  Until further clarification is provided by the State of California, and new regulations are issued, employers should not ask for documentation unless that documentation can be required for another purpose, such as leave under the Family Medical Leave Act (FMLA), the California Family Rights Act (CFRA), pregnancy disability leave, or workers’ compensation.  Notwithstanding such, if the employer has a personnel rule or board policy that requires documentation for sick leave usage, it is not recommended that employers impose discipline for employees who fail to produce documentation substantiating the use, despite having a policy. 
 
Employer’s Notice, Posting and Recordkeeping Requirements
 
This new law amends Labor Code Section 2810.5 to require employers to provide, at the time of hiring, written information about this new paid sick leave entitlement.  Certain employers may be exempt from this requirement. 
 
A. Posting Requirements
 
Employers will also be required to display in a conspicuous place in each workplace of the employer, a poster that notifies employees of their paid sick leave rights.  The Labor Commissioner is responsible for preparing this poster, and employers who wilfully violate the posting requirements will be subject to a civil penalty of not more than $100 per offense. 
 
B. Written Notice Requirements
 
Employers are also required to provide employees with written notice identifying the amount of paid sick leave available for their use on either the employee’s itemised wage statement required under Labor Code Section 226, or in a separate writing provided on the designated pay date with the employee’s payment of wages. 
 
C. Records Retention Requirements
 
New Labor Code Section 247.5 also requires employers to retain, for at least three years, records documenting the hours worked, paid sick days accrued, and the number of paid sick days used by each employee.  These records can be subject to inspection by the Labor Commissioner under Labor Code Section 1174, or by an employee under Labor Code Section 226.  An employer’s failure to maintain or retain adequate records creates a rebuttable presumption that the employer violated the law, absent clear and convincing evidence showing otherwise. 
 
Recommendations
 
1. If there is no existing sick leave policy, the employers should decide whether or not to use the accrual method or the front-load method, and to analyse the advantages and disadvantages of each method.  The accrual method will require more time, as payroll will have to keep good records and an accounting of the accrual.  It may be more time-efficient to use the front-load method if you do not have adequate personnel to monitor the accrual formula.  
 
2. Make sure you obtain a copy of the poster from the Division of Labor Standards Enforcement and post the new sick leave poster in a conspicuous and accessible place in each workplace, and determine how to address posting requirements for remote employees, if any exist. 
 
3. Make sure that your timekeeping, payroll and benefits department properly calculates, tracks, and records accrued and used sick time.  If using a third-party payroll processor, make sure that it is aware of and complies with the law’s new requirements.
 
4. Implement procedures to ensure that employees’ itemised wage statements include the amount of paid sick leave available to the employee; or, in the alternative, implement procedures to provide a separate document to the employee the amount of sick leave available to be given on the designated pay date.
 
5. Train supervisory and managerial employees, payroll personnel and human resources on the new law’s requirements and notification requirements for use of sick leave.