Paid Sick Leave for All – An Initial Analysis and Report on AB 1522

Posted on: November 6, 2014

Authored by: Steve Holden, Holden Law Group

Paid sick leave for everyone! It’s celebration time in California; unless you are an employer. California employers have once again been saddled with the task of understanding and complying with a new and complex employment law. Below you will find an outline of the key elements of the “Healthy Workplaces, Healthy Families Act of 2014.” The outline is designed as a starting point for understanding the new law and how it may impact your organization. Unfortunately, there are nuisances and unanswered questions found within the law and employers will need to carefully analyze existing and newly created sick leave policies to avoid liability.

Application

The law applies to all employers regardless of size. It will become effective July 1, 2015.

 

Eligible Employees

The law contains an ambiguous definition of employee eligibility. It states:

An employee who, on or after July 1, 2015, works in California for 30 or more days within a year from the commencement of employment is entitled to paid sick days as specified in this section.

This definition raises questions about whether the 30 days are counted only during the first year of employment or any year of employment and the related question of how the law applies to existing employees. It also raises the question of what is a “day” of work. Does any work on a day count or only a full day of work? Because of these ambiguities, the exclusion of any employee based upon working too few hours should be carefully analyzed.

The “30 or more days of work” requirement is one of the very few limitations on employee eligibility. The other limitations are:

  • Employees covered by a union contract meeting certain requirements are not eligible.
  • Employees providing in-home personal care as part of certain government assistance programs are not eligible.
  • Employees who are flight deck or cabin crew members of an airline are not eligible.

All other employees are eligible regardless of employee classification. It does not matter if the employee is part-time, full-time, seasonal, exempt, non-exempt, benefitted, non-benefitted, etc.

Because of the “working in California” language, it is also possible that employees residing in other states may be eligible for paid sick days if they spend enough time working in California. The extent to which this new law can create obligations for out-of-state employers will no doubt be tested in the courts. For now, employers with operations and personnel outside of California should carefully consider whether any out-of-state employee might be covered.

 

Amount of Paid Days Required

The law requires that eligible employees accrue a minimum of one (1) hour of sick pay for every thirty (30) hours worked. Both regular and overtime hours are counted for purposes of the accrual. Employees who are exempt under the administrative, executive or professional exemption are deemed to work forty (40) hours a week unless their normal workweek is less than forty (40) hours. In that case, they are deemed to work the number of hours in their normal workweek. The law does not specify how to count hours for other exempt employees such as outside sales personnel. Notwithstanding the minimum accrual rate, an employer can cap an employee’s total accrual at forty-eight (48) hours or six (6) days. The reference to hours “or” days creates another ambiguity in the law. For example, if an employee regularly works five (5) hours per day, is the permissible cap forty-eight (48) hours or thirty (30) hours?

 

Use of the Paid Sick Days

An employer may prohibit employees from using accrued sick days until the 90th day of employment. After the 90th day, the employee must be able to use the paid sick days as they accrue.

An employer can also limit the amount of paid sick days an employee can use in each year of employment to twenty-four (24) hours or three (3) days. If an employee is not capped out and has unused sick days, the days must be carried over into a new year for the employee’s use.

An employer can avoid the administration of calculating accruals, caps and carry-overs if the full amount of paid leave (at least 24 hours or three days) is provided to the employee at the beginning of each year. With this kind of “dump-in” policy, an employee may not carry over unused sick days, but will receive a new annual allotment as the year rolls over.

An employee can use the paid sick days for the diagnosis, care or treatment of an existing health condition or for preventive care either for themselves or a family member. The paid sick days may also be used for an employee who is a victim of domestic violence, sexual assault or stalking.

The term “family member” is defined to mean one of the following:

  • Child (biological, adopted, foster, step, legal ward or in loco parentis)
  • Parent (biological, adoptive, foster, step, legal guardian or in loco parentis)
  • Spouse
  • Registered domestic partner
  • Grandparent
  • Grandchild
  • Sibling

Because the new law does not modify or clarify the definition of “grandparent,” “grandchild” or “sibling” in the same fashion as it does for “child” and “parent,” it appears that only biological grandparents, grandchildren and siblings fall within the definition. Also subject to wide interpretation will be the question of what constitutes “preventive care” under the new law. Might an employee’s desire to have a day at the spa be preventive care?

The definition of “family member” and the permissible uses of the new paid sick leave are broader than those set forth under Labor Code section 233 (kin-care) and the Family and Medical Leave Act/California Family Rights Act (FMLA/CFRA). Accordingly, employers will need to carefully determine whether paid sick days taken by an employee also qualify to be tracked and protected under the other laws; in some cases they will not.

The paid sick days must be provided upon the employee’s request. The request can be oral or written, and the employee, not the employer, determines how much paid sick leave he or she needs to use. The employer may, however, set a reasonable minimum increment for use of the leave so long as the increment does not exceed two (2) hours. If the need for the leave is foreseeable, the employee must provide reasonable advance notice. If not foreseeable, the employee must provide notice as soon as practicable.

An employer cannot require an employee to search for or find a replacement worker as a condition for receiving the paid sick days requested.

 

Payment of Sick Days

The sick days must be compensated based upon the employee’s hourly wage, and must be paid no later than the next payday after the sick day was taken. The new law sets forth a method for calculating an employee’s “hourly wage” where the employee is paid different rates of pay, paid on commission, paid by piece rate or is nonexempt and paid a salary. That method is as follows:

The rate of pay shall be calculated 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.

Although similar, this method is not the same calculation used to arrive at an employee’s “regular rate of pay” for overtime and missed meal and rest break penalties. Accordingly, in many instances, multiple calculations will be necessary to determine the proper rates for an employee’s pay.

 

Termination of Employment and Reinstatement

Unlike a vacation or paid time off (PTO) benefit, the sick days provided under the new law do not need be paid out at the termination of employment. Employers that combine the new sick days with a vacation or PTO benefit will have to follow the rules relating to vacation and PTO, including the requirement that they be paid out at termination.

An employer must reinstate previously accrued and unused paid sick days if an employee leaves employment and then is rehired within one (1) year. Moreover, the rehired employee must be permitted to use those previously accrued sick days and permitted to begin accruing additional paid sick days immediately upon rehire. This may create significant issues for employers utilizing large numbers of seasonal employees where the employees are regularly rehired within a one (1) year period.

 

Sick Days are Protected Time Off

Employers should be aware that paid sick days taken pursuant to the new law will take on the same type of protected status as FMLA/CFRA leave and Pregnancy Disability Leave (PDL) even if the sick days do not qualify to be counted as FMLA/CFRA/PDL leave. This will add new complexity for addressing and documenting employee attendance issues.

 

Impact of Existing Employee Benefits

An employer’s existing benefit policies may meet the requirements set forth in the new law. An employer is not required to provide the paid sick days specified in the new law if the employer already provides employees with vacation or other paid time off in an amount that meets or exceeds the accrual rate, cap limit and carry over requirements of the new law. The paid vacation or other paid time off provided by the employer must be available to use for the same purposes and under the same conditions as the paid sick days specified in the new law.

In other words, an employer that already provides paid time off is not required to provide more time off because of the new law if the existing paid time off policy meets or exceeds all of the minimum requirements applicable to paid sick leave set forth in the new law. Many employers will have to modify existing policies to ensure that all the requirements are met. For instance, if the employer pays the time off at a set hourly rate under its existing employee benefit policy, the policy will have to be amended to reflect the “hourly wage” calculation required under the new law.

 

Notices and Records

An employer must provide each eligible employee with a written notice setting forth the amount of paid sick leave available to the employee each pay period. The notice can be included on the employee’s itemized wage statement or on a separate document provided to the employee at the time wages are paid.

An employer must also provide each new employee with notice of the new sick pay law. The notice to employees required by Labor Code section 2810.5 must now include information about an employee’s right to accrue and use paid sick leave and the employee’s protections under the new law. The Labor Commissioner is required to develop the notice language and is expected to provide an updated template version of the required notice. The Labor Commissioner is also required to develop a poster which advises employees of the new paid sick leave rights. Once developed, employers will be charged with maintaining the poster in a conspicuous place in each workplace.

Under the new law, employers must keep records for at least three (3) years that show the number of hours worked and paid sick days accrued and used by an employee. If the employer does not keep adequate records, the law creates a presumption that the employee is entitled to the maximum number of hours accruable. In other words, poor record keeping could result in the double payment of the sick leave, plus the penalties and other costs associated with liability under the new law.

Employers should also be mindful of the complexity of record keeping requirements. On the one hand, compliance with the new law requires detailed records of paid sick leave accrued and used. On the other hand, privacy law places burdens on the employer to keep certain information confidential.

The new law specifically states that it does not alter the existing laws guaranteeing employee privacy of health information or information related to domestic violence and sexual assault. The new law does not address the extent to which employers can request and obtain proof that an employee is using the paid sick days for a purpose authorized by the law (i.e. diagnosis, care or treatment of an existing health condition or for preventive care either for themselves or a family member). This creates an open question on what an employer can and cannot do to verify the purpose without running afoul of privacy laws. Accordingly, it will be advisable to keep accrual and use records which contain no details about the reason for the sick leave taken. Any records received by an employer about the reasons for the sick leave should be maintained in a separate confidential file.

No Discrimination or Retaliation

As with almost all new employment laws in California, the new paid sick leave law prohibits discrimination and retaliation. Specifically, employers are prohibited from denying employees the right to use accrued paid sick days. They are also prohibited from discriminating or retaliating against an employee for using or attempting to use sick days or filing a complaint or participating in an investigation of an alleged violation of the new law.

 

Cost of Noncompliance

The cost of noncompliance will be high. The law contains numerous penalties for not providing the mandated sick days and multiple ways the unpaid sick days and penalties can be recovered. Employees may file a complaint with the Labor Commissioner, and through the administrative process obtain reinstatement, back pay, the payment of unpaid sick days, an administrative penalty equal to three times the unpaid sick days, but no less than $250 and no greater than $4,000, an additional penalty for “other harm” equal to $50 per day that a violation occurred or continued, not to exceed $4,000 and interest. In addition, an employer may be assessed a civil penalty to the state of $50 per day, per employee and there is no maximum. Employers that willfully violate the posting requirement may be assessed a $100 penalty for each offense.

Instead of an administration action, the Labor Commissioner and the Attorney General are authorized to file lawsuits to enforce the law and obtain relief on behalf of an employee. In such lawsuits, employers can be held liable for all unpaid sick days, all the administrative penalties, reinstatement, back pay, interest, costs and attorneys’ fees. While the new law does not expressly provide a right for employees to bring civil lawsuits on their own, the law does appear to authorize Private Attorney General Act claims based upon an employer’s failure to comply with the new law. Interestingly, in the case of such claims, the person pursing the matter on behalf of the public is only entitled to receive equitable, injunctive and restitutionary relief, costs and attorneys’ fees. They are not entitled to the various penalties set forth in the new law.

Employers may be able to avoid the penalties where violations are the result of isolated and unintentional errors that are clerical in nature. Because of specific language in the new law, it is unlikely that an employer can escape the penalties by claiming an unintentional error unless prior to the violation the employer had policies, practices and procedures in place fully complying with the new law.

 

Local Laws

San Francisco and San Diego have paid sick leave ordinances on the books. Other cities may follow in the future. The new law does not expressly preempt local ordinances. Accordingly, employers operating in cities with paid sick leave ordinances should analyze them carefully in conjunction with the new state law. The employer’s policies should be structured to ensure compliance with both laws.

 

To Sum It Up

The Healthy Workplaces, Healthy Families Act of 2014 is by no means a model of clarity and simplicity. Ensuring that your policies and practices are in compliance with the new law will require effort. The structure for such policies and practices will vary depending upon your unique set of circumstances and desired outcomes. We stand ready to assist you.