AB 1522 —the Healthy Workplaces, Healthy Families Act of 2014—will provide California employees up to three days of paid sick leave per year. It is effective July 1, 2015. This article provides a quick summary of AB 1522 provisions and addresses questions we have received from clients in the past two months. Click Here for a more detailed explanation, published on HealthReformUpdates.com September 10, 2014.
What Employers must comply?
All size employers must comply. There is no exemption for small employers (even those with only one or two employees) or government employers. However, paid sick leave is not required for certain employees covered by collective bargaining agreements, certain providers of in-home support services, and certain airline industry employees (flight deck or cabin crew members).
Who is Eligible?
Most employees (exempt and non-exempt) who work in California for at least 30 days are entitled to paid sick days at the employee’s regular rate of pay. This includes temporary, part-time, and seasonal employees who work 30 or more days within a year from the date they are first hired.
When is the Paid Sick Leave Requirement Effective?
Employees do not begin to accrue paid sick leave until the later of July 1, 2015 or date of hire. An employee is entitled to use accrued sick days beginning on the 90th day of employment.
How Many Days or Hours of Paid Sick Leave does each Employee Get?
An employer can either use the accrual method or the up-front lump-sum method:
- Under the accrual method, an employee must accrue at least 1 hour of paid sick leave for each 30 hours worked. This equates to approximately 5.3 hours per month for employees who work 40 hours per week. However, an employer can limit the accrual to 6 days or 48 hours annually.
- Under the up-front lump-sum method, an employer can credit an employee with 3 days or 24 hours of sick leave at the beginning of each year or 12-month period, and the employer will not have to track accrual based on hours worked. (Section 246(e))
Employees who work part-time are entitled to accrue paid sick time at the same rate as those who work full-time; they just accrue fewer hours per month because they work fewer hours.
Exempt employees are deemed to work 40 hours per week for accrual purposes, except that employees who normally work fewer than 40 hours will accrue based on their actual scheduled workweek.
What Limits Can an Employer Set?
Limit on Annual Accrual:An employer can limit annual accrual of paid sick leave to 6 days or 48 hours, as long as an employee’s rights to accrue and use paid sick leave under the new law are not otherwise limited.
Limit on Carryover: An employer can limit carryover of accrued sick days to no more than three days or 24 hours of paid sick leave from one year to the next. However, no accrual or carry-over is required if the employer uses the up-front lump-sum method and credits an employee with at least 3 days or 24 hours of sick leave as of the beginning of each year.
Limit on Use: Employers can set a reasonable minimum increment of time, not to exceed two hours, for the use of paid sick leave.
Under the Accrual Method, does Sick Pay Accrue on Overtime Hours? On paid vacation and holiday time?
It appears that under the accrual method, paid sick time accrues on all hours worked, so an employee who worked overtime would accrue paid sick time faster than an employee who worked only 40 hours/week. On the second question, it is not clear under the law, but it appears that paid sick time does NOT accrue on paid vacation and holiday time. The law provides that (under the accrual method) paid sick time must accrue at the rate of 1 hour for every 30 hours worked. It does not say for each “hour of service” which is a term used in the federal and state labor laws that means each hour for which an employee is paid or entitled to pay, even if the employee did not actually work. So, the term “hour of service’ includes paid vacation and holiday time. But the term “hours worked” seems to include only hours for which the employee worked and was paid.
What is the Pay Rate for an Employee While Out on Paid Sick Leave?
An employee’s pay rate during paid sick leave shall be the employee’s normal rate during regular work hours. Where this is not straightforward (e.g., if an employee had different hourly pay rates, was paid by commission or piece rate, or was a nonexempt salaried employee), the employer shall calculate the pay rate during paid sick leave by dividing the employee’s total wages (not including overtime premium pay) by the employee’s total hours worked in the full pay periods during the 90 days prior to the date the accrued sick leave starts.
Using Paid Sick Leave
As of July 1, 2015, employees can use paid sick days as they accrue, but no earlier than the 90th day of employment. Employers may lend employees paid sick days before they have accrued. Employees cannot be required to find replacement workers to cover the time they are on paid sick leave. Employees must provide “reasonable” advance notice if the need for paid sick leave is foreseeable. If it is not unforeseeable, the employee must provide notice of the need for leave as soon as practicable.
Employees may use paid sick time for themselves or a family member, which includes: child, parent, spouse, registered domestic partner, grandparent, grandchild, or sibling.
What if an Employer Already Offers Paid Sick Leave or Paid Time Off?
If an employer already has a paid leave policy or paid time off policy, the employer is not required to provide additional paid sick days if the employer’s policy either;
- Satisfies the accrual, carryover and use requirements of AB 1522; or
- Provides at least 24 hours or three days of paid sick leave, or equivalent paid leave or paid time off, for employee use for each year of employment or calendar year or other 12-month period.
The employer’s policy must make available an amount of leave that may be used for the same purposes and under the same conditions as specified in AB 1522.
Employers who already offer paid sick leave or paid time off should review their existing policies and make any needed changes. Even if no substantive changes are necessary, employers must comply with the new notice and record-keeping requirements.
If an Employee Terminates must the Employer Pay Accrued Sick Leave?
Employers are not required to pay out accrued but unused sick days when an employee terminates employment, as is required for accrued vacation time. If an employee is rehired within one year, however, the employer must reinstate the accrued but unused balance the employee had at date of termination. The rehired employee can use that time plus will start accruing additional paid sick leave under the regular rules (i.e., one hour for each 30 hours worked), except that if the employee already had reached the maximum accrual then no additional hours would accrue.
What Notices and/or Posters are Required? How Long must Records be Retained?
- At time of hire, employers must provide written notice to employees of their paid sick leave rights (to accrue and use paid sick leave, to be free from retaliation, and to file a complaint). This adds to the information already required at time of hire by Labor Code section 2810.5. .
- At regular paydays, employers must provide each employee with written notice of the amount of paid sick leave available, either on the employee’s pay stub or in a separate writing provided at the same time.
- In each workplace, employers must display a poster (in a conspicuous place) informing employees of their paid sick leave rights. The Labor Commissioner is required to create this poster and make it available.
Employers must retain, for at least three years, records documenting the hours worked and paid sick days accrued and used by each employee. Failure to maintain adequate records results in a presumption that the employee is entitled to the maximum number of hours accruable under this law, unless the employer proves otherwise by clear and convincing evidence.
What are the Penalties if an Employer is not in Compliance?
The Labor Commissioner may order any of the following, if it finds an employer in violation of AB 1522 requirements: reinstatement, back pay, payment of sick days unlawfully withheld, plus payment of an administrative penalty. The administrative penalty may be the greater of three times the dollar value of the paid sick days withheld, or $250, to a maximum of $4,000.
If the employer fails to promptly comply with the above, the Labor Commissioner may take enforcement action, which could result in a penalty of up to $50 per day per employee whose rights are violated.
Employees may not file lawsuits against employers for allegedly violating the new paid sick leave provisions. However, the Labor Commissioner or the Attorney General may file a civil action in court against the employer and, if they prevail, are entitled –“on behalf of the aggrieved” employee, to all the remedies listed above (i.e., reinstatement, back pay, payment of sick days unlawfully withheld, $50 per day per employee) plus reasonable attorneys’ fees and costs.
AB 1522 does include some language that protects employers: An employer shall not be assessed any penalty or liquidated damages “due to an isolated and unintentional payroll error or written notice error that is clerical or an inadvertent mistake regarding the accrual or available use of paid sick leave.”
Employers must not retaliate against employees who use paid sick time, or file complaints with the Labor Commissioner claiming the employer violated their rights.
AB 1522 establishes “minimum” requirements and does not preempt or limit other applicable laws that provide greater accrual of paid sick days, so some California employers might have to have multiple paid sick leave policies to comply with all applicable laws. (e.g. in San Diego and San Francisco).