California’s new paid sick leave law may apply to all companies, even those that are out-of-state employers. California has joined the ranks of Massachusetts, Oregon, Seattle, Portland, San Francisco and Newark, among other cities and states, that have implemented, or are in the process of implementing paid sick leave, which may require out-of-state and out-of-city employers to provide paid sick leave for employees that work in these locations for as little as 56 hours to 30 days per year.
California's Healthy Workplaces, Healthy Families Act of 2014 provides for mandatory paid sick leave to any employee working in California for 30 days or more in a year, even if employed by a non-California employer, unless an employee fits into one of the few exceptions to the types of employees covered by the law. Eligible employees include part-time and temporary workers.
Employers of a workforce with sufficient travel and/or work in California should consider a tracking protocol to monitor their employees' eligibility under the law to ensure compliance and avoid any fines or penalties for failure to do so, which range from $50 to $4,000 in the aggregate. Further possible penalties include additional fines owed to the state as well as the potential for the labor commissioner or state attorney general to file a civil action to obtain relief on behalf of any employee.
The law as initially written caused significant confusion and contained many ambiguities, making the day-to-day application for some employers difficult. Accordingly, the state legislature moved swiftly to put into effect clean-up amendments aimed at clarifying the uncertainties of the law, with Gov. Jerry Brown signing the clarifying bill on July 13, 2015. To ensure timely compliance and minimal disruption to business operations, employers of all sizes with employees working in or regularly traveling to California should become familiar with the new paid sick leave law.
The following 10 points are the cornerstones of compliance:
- Accrual rate: Two common accrual provisions of paid sick time will be: (1) based on hours worked (one hour for every 30 hours worked) or (2) via a lump sum of three days or 24 hours at the beginning of the year. However, employers may also use other accrual methods as long as they meet the minimum requirements of accruing it on a regular basis and accrual of 24 hours by the 120th day of employment, each calendar year, or 12-month period.
- Existing sick leave or paid time off policy: The law does not require an employer to provide additional paid sick days if: (1) the employer has an existing paid leave or PTO policy as of Jan. 1, 2015, (2) the employer makes the paid leave available under the same conditions as stated in the new law and (3) the existing policy meets the following requirements: (i) an accrual method providing on a regular basis at least one day or eight hours of accrued sick leave or paid time off within three months of employment of each calendar year, or each 12-month period; and (ii) employees are eligible to earn at least three days or 24 hours of sick leave or PTO within nine months of employment. Thus, existing sick leave or PTO policies may require modification to ensure compliance. Additionally, employers with adequate pre-existing policies still must comply with all notice and record-keeping requirements.
- Sick leave use: Employers can limit use of paid sick leave to 24 hours or three days during each year of employment. Employers may set a reasonable minimum increment, not to exceed two hours, for employees to use accrued sick leave. The employee otherwise is entitled to determine how much sick leave he or she needs to use. Employees become eligible to use their accrued paid sick leave after their 90th day of employment, after which they may use paid sick leave as it is accrued. Employers cannot require employees to locate a replacement worker to cover days on which an employee uses paid sick leave.
- Qualifying reasons for use: Employers must, upon an employee’s written or oral request, provide paid sick leave for: (1) the employee’s own or family member’s diagnosis, care or treatment of an existing health condition, or preventive care; and (2) an employee who is a victim of domestic violence, sexual assault or stalking to seek aid, treatment or related assistance.
- Covered family members: The law defines family member broadly to include: (1) child (regardless of age or dependency status) — biological, adopted, or foster child, stepchild, legal ward, or a child to whom the employee stands in loco parentis; (2) biological, adoptive, or foster parent or step parent, legal guardian of the employee or the employee’s spouse or registered domestic partner, or a person who stood in loco parentis to the employee when the employee was a minor child; (3) spouse or registered domestic partner; (4) grandparent; (5) grandchild; and (6) sibling.
- Rate of pay for paid sick leave: Nonexempt employees are paid using the following calculations: (1) in the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time, whether or not the employee actually works overtime in that workweek; 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. For exempt employees, employers should calculate paid sick leave in the same manner as the employer calculates wages for other forms of paid leave time.
- Carry over: Employees earning paid sick leave under the accrual method must be permitted to carry over all accrued, unused paid sick leave to the following year, but employers may cap the accrual of paid sick leave at 48 hours or six days. Under the “lump sum annual grant” alternative option, no accrual or carry over is required. The “lump sum annual grant” method may offer administrative time and cost savings.
- Employee notices/record keeping: Employers must give all nonexempt employees a new wage theft prevention notice, announcing the new paid sick leave law and any changes to existing sick leave policies, or provide such notice on a pay stub or wage statement. Employers must also post in the workplace a poster on the new sick leave law. Employers are not obligated to inquire into or record the purposes for which an employee uses paid sick leave or PTO, but are required under the law to provide written notice to employees of the amount of paid sick leave available, or PTO an employer provides in lieu of sick leave, on the employee’s itemized wage statement. If an employer provides unlimited paid sick leave or unlimited PTO to an employee, the employer may now satisfy this requirement by indicating on the notice or the employee’s itemized wage statement “unlimited.”
- Exemptions: The California paid sick leave law applies to all employees, including part-time, temporary and seasonal employees, with few exceptions. Certain employees governed by a valid collective bargaining agreement, in-home supportive services providers, certain air carrier and flight personnel and retired annuitant employees of a public entity may be exempt from the sick leave law.
No pay out required: Unlike vacation time, accrued sick leave need not be paid out upon employment separation. However, should the employee be rehired by that same employer within a year of separation, they shall be entitled to use the previously accrued and unused paid sick days as long as the employee was not paid out at the time of separation. The rehired former employee will also be entitled to use those previously accrued and unused paid sick leave days and to accrue additional paid sick days upon rehiring subject to the use and accrual limitations.
In summary, employers should consult with an experienced labor and employment attorney for further guidance in complying with the law. A detailed review of employer policies and employee handbooks is recommended to ensure compliance with the law.