IMPORTANT NOTE: On July 13, 2015, California Governor Jerry Brown signed into law urgency legislation amending the Healthy Workplaces, Healthy Families Act of 2014. The new amendments took effect as of July 13, 2015. The amendments clarify several key aspects of the law, including eligibility requirements, methods for satisfying the accrual requirements, limits to the use of paid sick leave, the calculation of sick pay, and recordkeeping requirements.
Employers are urged to consult our advisory discussing these amendments which can be found here. Given the complexity of the law and these amendments, prudent employers should also continue to seek guidance from counsel to ensure they are in compliance.
California’s “Healthy Workplaces, Healthy Families Act of 2014,” otherwise known as California’s Paid Sick Time (or Paid Sick Leave) law, went into effect on Jan. 1, 2015, and will become operative for accrual purposes on July 1, 2015. The Division of Labor Standards Enforcement (DLSE) recently issued a revised set of frequently asked questions (FAQs) to help clarify the Act. The complete list of revised FAQs can be found here.
Because many unanswered questions remain, we anticipate that there will be further clarification, maybe even an amendment to the Act, in the coming months. In the meantime, here are questions we’ve received and our answers based on the information we have available.
Eligibility and Coverage Questions
1. When does an employee become covered by the Act?
With exceptions for certain airline employees, in-home care employees, and employees covered by a union contract, an employee becomes a “Covered Employee” under the Act whenever he or she works more than 30 days for an employer in California. Coverage eligibility is distinct from both when sick time accrual begins (on the date of hire), and when the employee can first use accrued sick time (after 90 days of employment, if the employer chooses to take advantage of that right). The chart below summarizes the separate concepts of eligibility, accrual, and use:
When Does an Employee Become Eligible for Coverage under the Law?
After the employee has worked a total of 30 days within a year for an employer in California; the 30 days do not have to be consecutive.
When Does an Employee Begin to Accrue Paid Sick Time?
On the Act’s operative date of July 1, 2015, or, for employees hired after that date, immediately upon hire.
When Does an Employee Have the Right to Use Accrued Paid Sick Time?
On the 91st day after the employee’s hire date.
2. Are employees covered by a collective bargaining agreement excluded from the coverage of the Act?
Yes, but only if the collective bargaining agreement provides for overtime, sick time, the arbitration of disputes, and a regular wage rate of at least 30 percent more than the state minimum wage. At present, that amount is $11.70 per hour (based on a $9.00 minimum wage); effective Jan. 1, 2016, it will increase to $13.00 per hour (based on a $10.00 minimum wage). In the construction industry, there is the added requirement that there be an express waiver of the Act in the collective bargaining agreement “in clear and unambiguous terms.”
3. Are temporary employees covered by the Act?
Yes. They are covered on the same terms as all other employees. When temporary employees are engaged through a staffing agency, the agency will have primary responsibility for compliance with the Act. (Employers should double check their agreements with staffing agencies, to be sure this is made clear.) The DLSE FAQs emphasize that the obligation to provide paid sick time extends to employers and “joint employers,” so the traditional “joint employer” test that focuses on control and supervision will apply in the case of any challenge.
4. What if the employer re-hires an employee within 12 months of separation?
The employer must reinstate the employee’s unused balance as of the termination date, and the employee would become immediately eligible to accrue and use the sick time (assuming the employee had worked in California for 30 days and met the 90-day probationary period when he or she previously worked for the employer). If the employee is re-hired after 12 months of separation, the employer would be under no obligation to reinstate the sick time balance.
5. Can the employer provide PTO instead of sick time?
Yes, the Act expressly provides that an employer who chooses to have a Paid Time Off (PTO) policy instead of a sick time policy complies with the Act as long as the PTO policy satisfies all of the Act’s requirements with respect to eligibility, accrual, usage, notice, recordkeeping, etc. Satisfying these requirements can be more challenging than it would appear at first blush, however, so we advise that employers give careful thought to this decision. Any employer considering switching from a PTO policy to separate vacation and sick time policies should do so now because the conversion will be more difficult after July 1.
6. If the employer has a PTO policy and an employee separates and is rehired within 12 months, how is the reinstatement of sick leave handled?
One of the requirements for PTO is that, like vacation, all accrued, unused PTO must be paid out to an employee on termination of employment. To comply with the Act, if the employee were re-hired within 12 months, the employer would have to reinstate to the employee’s credit the amount of PTO that was equivalent to the sick time the employee had accrued at the time of termination. This would be the entire PTO balance unless the employer’s policy established an accrual cap on the portion of PTO that was designated as sick time – which would be unworkable with existing PTO policies.
Accrual and Usage Questions
7. For the purpose of accrual (1 hour of paid sick time for every 30 hours worked), do overtime hours count?
Yes, for non-exempt employees, overtime hours do count. Hours of paid time off like vacation, sick pay, holiday pay, and PTO do not count.
8. Employers can cap sick time usage at 24 hours per year; can the cap be based on a calendar year?
Apparently no. The statute states that use of sick time can be capped at 24 hours per “year of employment.” The DLSE FAQs clarify that for employees who were hired before the July 1, 2015, operative date, the cap should be based on a July 1-June 30 year, and for employees hired thereafter, the cap should be based on their anniversary year. There is no mention of a calendar year cap, and that does not appear to be compliant with the law’s prohibition against forfeiture of accrued sick time. The following example illustrates the problem. Employee Doe is hired on June 1, 2015. She accrues the maximum 48 hours over the course of 2015 (she works a lot of overtime, and takes no time off). She uses 24 hours of sick time in March 2016. She has 24 hours of accrued time remaining, and accrual begins again (at the rate of 1 hour for every 30 hours worked). Her second year of employment begins on June 1, 2016. If the employer had a calendar year cap, Employee Doe would have exhausted her 2016 usage entitlement in March, and she would be deprived of her right to use her accrued sick time during the balance of the calendar year despite having accrued sick time available, and being in her second anniversary year of employment. Consequently, capping use on something other than the anniversary year seems to run afoul of the Act’s requirement that employees be allowed to use up to 24 hours of paid sick time per “year of employment.”
9. If the employer awards sick time using the up-front method instead of the accrual method, then can a calendar year be used?
Apparently yes. The Act expressly permits employers to grant at least 24 hours of paid sick time (the annual usage cap) per year, up-front as an alternative method of compliance. The Act further specifies that the up-front award can be made at the beginning of each calendar year, year of employment, or any other 12-month period. This method is proving to be attractive to many employers because of its apparent simplicity.
10. What are the pros and cons of the up-front method?
The up-front method relieves the employer of the need to track accrual. However, there are challenges for both initial implementation (What to do for 2015? Giving the full 24 hours is the safest answer), and how to treat new hires mid-year in any year. This must be carefully planned, especially with non-exempt employees. On balance, if the employer’s time-keeping system allows for it, accrual may be easier to implement.
11. Can the up-front method be used for employees in San Francisco and Oakland?
No. The ordinances adopted by San Francisco and Oakland do not have usage caps. So covered employees in those cities must be allowed to accrue sick time up to the accrual cap (72 hours for employers with 10 or more employees), and must be allowed to use all of their accrued sick time for a covered purpose.
12. Can employees hired before April 1, 2015, use paid sick time as soon as it accrues?
Yes. Employers can, if they choose, require that employees exhaust a 90-day waiting period before using accrued paid sick time. The waiting period is satisfied 90 calendar days after the employee’s hire date. Thus, for employees hired at any time before April 1, 2015, the right to use accrued sick time will be coextensive with the operative date of the Act, that is, July 1, 2015. For employees hired after April 1, 2015, entitlement to usage will begin on the 91st day following their hire date assuming the employer has adopted a policy that provides for a 90-day waiting period.
13. How does usage work for a part-time employee?
Although the Act states that employers may cap annual employee usage of paid sick time at “24 hours or three days,” other parts of the Act and the FAQs make clear that a “day” must be defined by each employee’s own work schedule. For example, where the part-time employee works 6 hours per day, the employee’s workday would be six hours long. Accordingly, if this employee’s takes 3 days of sick time, he or she would have taken 18 hours of sick time and still have 6 hours remaining to use (assuming he or she had 24 hours of sick time accrued).
14. Can the employer mandate that sick time be taken in set increments?
Yes and no. The Act provides that employers can set a minimum usage increment of 2 hours. However, this does not mean that the employer can require 2-hour blocks. So if, for example, an employee needed to use 3 hours of sick time for a doctor’s appointment, the employee would be entitled to that usage and could not be required to take 4 hours.
15. How is sick time paid if a non-exempt employee has a fluctuating rate of pay?
Employers are required to use a 90-day rolling look-back in these situations. The sick time rate of pay is 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.
16. Is it okay to provide different sick time policies for full-time vs. part-time vs. temporary employees?
Yes. Nothing in the Act prevents an employer from maintaining a different or more generous sick time policy for, say, regular employees vs. temporary employees. As long as the statute’s minimum requirements are met for all employees, different policies can be provided for different types of employees.
17. What proof can the employer require that paid sick time was used for a proper purpose?
There is no guidance on this. It seems logical that the employer can require the same sort of reasonable proof as is required for other statutorily protected absences, such as kin care. Of course, care should be taken to assure non-discrimination. And once proper use is demonstrated, there can be no penalty imposed on the employee for taking the time. This means, among other things, that this absence cannot be counted against the employee for attendance-management purposes.
18. How does the new law interact with California’s “Kin Care” law?
California’s long-standing “kin care” law provides that employees have the right to use up to one-half of the amount of sick time that the employer’s policy allows to be accrued annually (provided the employee has that amount accrued) to care for a sick child, parent, spouse, or domestic partner. The Act provides a more extensive list of family members and permissible uses, and mandates that the employer allow 100% of sick time accrued under the Act to be available for any of these uses (up to the usage cap). (See DWT advisory from Sept. 18, 2014.) The two laws stand side-by-side, so if an employer chooses to provide more sick time than the Act requires, the employer will still have the kin care obligation together with the obligations of the Act.
19. What individualized information is required?
On payday, employers are required to provide each employee with notice of the amount of sick time (or PTO) he or she has available for use. The information can be provided either on the pay stub or in a separate writing provided at the same time as the paycheck.
20. What records must be kept?
Employers must maintain records showing how many hours of sick time each employee earned and used. These records must be kept for three years.
21. When does the DLSE poster have to be posted?
Employers were required to post it as of January 1, 2015, when the Act became effective. It can be found here.
22. Do employers have to use the DLSE template for the wage-theft-prevention notice?
No. As long as the required information is provided, employers are free to provide their own form of notice. The DLSE’s template may be the best choice, however, as the DLSE created it to comply with the law.
23. Do employers have to give a new notice to existing employees even if there will be no change to the sick time or PTO policy that is applicable to them?
Yes. Employers are required to provide even to existing employees a specific notice containing information about the Act and how the employer will comply. The DLSE FAQs state that a writing that refers to or summarizes the employer’s existing policy and that contains the points of information specified in the DLSE template will be compliant.
The full text of the Act can be read here.
For guidance on complying with Act, please contact any of our California employment lawyers.