On July 13, 2015, Governor Brown signed urgency legislation amending California’s new sick leave law—the Healthy Workplaces, Healthy Families Act of 2014. The amendments, which took effect immediately, clarify the law and provide some flexibility for those employers who had existing sick leave or paid time off (PTO) policies.
Alternate accrual formulas
One of the most significant changes is the amendment’s addition of alternate accrual methods. Previously, the law mandated an accrual rate of one (1) hour of paid sick leave for every 30 hours worked, which was an administrative nightmare for many employers. Employers with existing sick leave or PTO policies where employees accrue sick leave weekly or per pay period were finding it difficult to implement the new law’s requirements granting employees sick leave based on the number of actual hours worked.
The amendments now allow employers to use an accrual formula other than the one (1) hour of paid sick leave for every 30 hours worked so long as the employee accrues paid sick time on a regular basis—i.e., weekly, monthly or per pay period—and the employee will have no less than 24 hours of accrued sick leave or PTO by the 120th day of employment. For example, an employer may now provide a certain amount of sick time or PTO per week regardless of the number of hours worked during that timeframe so long as the employee accrues no less than 1.4 hours per week.
Grandfather clause for existing sick leave or PTO policies
Under the amendments, an existing policy in place before January 1, 2015, complies with the sick leave law if the leave is accrued on a regular basis; the employee accrues at least one (1) day or eight (8) hours of accrued sick leave or PTO within three (3) months of employment each year; and the employee was eligible to earn at least three (3) days or 24 hours—whichever is greater—within nine (9) months of employment. The policy must still comply with the other requirements of the law, such as granting the employee the right to use the time to care for designated family members. If an employer who had a PTO policy that is grandfathered in changes its accrual rate, it must amend its policy to comply with the law’s accrual methods or provide 24 hours of leave at the beginning of the year or each 12-month period.
Unlimited PTO plans
The sick leave law requires employers to track separately each employee’s sick leave accrual and use, and provide employees with written notice setting forth the amount of paid sick leave available each pay period. Companies that utilize unlimited PTO plans—those that allow employees to take paid time off whenever they need or want—do not track PTO accrual and usage and, therefore, such plans appeared not to be in compliance with the law’s requirements. The new amendments clarify that an employer with an unlimited PTO plan does not need to ask employees whether time taken is for a reason permitted under the sick leave law. In addition, the amendments state that an employer offering unlimited PTO complies with the law’s notice requirements if employees’ paystubs show employees they have “unlimited” PTO available to them.
Reinstatement of sick leave balances for employees who are rehired by the employer within one (1) year of separation
Under the law, employers are required to reinstate accrued, but unused, sick leave to any previously discharged employee who returns to the employer within one (1) year. Employers that utilize PTO plans, which under California law are considered wages requiring employers pay out the entire amount of accrued but unused PTO when the employment relationship is terminated, were unclear whether they were exempted from the reinstatement obligation. The amendments make clear that an employer is not required to reinstate previously accrued paid leave if the employee was paid out at the time of termination, resignation, or separation.
Employers should consult counsel to develop defensible policies
Penalties for non-compliance with the sick leave law are significant, so employers should once again review their policies to ensure they are consistent with the law. Although the amendments provide important changes and clarifications, a number of unanswered questions remain. Employers should consult counsel to implement reasonably prudent policies that are defensible in the event litigation arises over the provisions of the law that are still ambiguous.
Hilary Weddell is an attorney with McManis Faulkner whose practice focus is employment law. For more information, please visit mcmanislaw.com.