What Every Employer Needs to Know about California’s Paid Sick Leave Law

The Healthy Workplaces, Healthy Families Act of 2014 went into effect on January 1, 2015, but employees’ right to accrue and take sick leave does not take effect until July 1, 2015. Are you ready? Starting July 1, 2015, qualifying employees will be entitled to at least 24 hours of paid sick leave in a 12-month period.

I. Who Qualifies for Paid Sick Leave?

Employees who work at least 30 days in California within a year, including part-time employees, per diem employees, and temporary employees, qualify for sick leave under the Act. Employees must work for an employer for at least 90 days before they can actually take sick leave.

Employees can take paid sick leave for themselves or a family member for diagnosis, care, or treatment of an existing health condition, or for preventive care. Family members include (1) biological, adopted, or foster child, stepchild, legal ward, or a child to whom the employee stands in loco parentis (regardless of age or dependency status); (2) biological, adoptive, or foster parent or stepparent, 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.

Paid sick leave may also be used by employees who are victims of domestic violence, sexual assault or stalking to obtain relief, including, but not limited to seeking medical attention or psychological counseling, obtaining certain social services, applying for a restraining order or injunction, or participating in safety planning or relocation.

Employees can take partial days off, but employers can require them to take leave in 2-hour minimum increments. Any such requirements must be explicitly stated in the employer’s policy.

II. Employers Must Decide Between Two Different Methods of Implementing the New Sick Leave Law: the Accrual Method or the Lump-Sum Method

The Accrual Method

Under the accrual method, employees accrue at least 1 hour of paid sick leave for every 30 hours worked. (Exempt employees are treated as working the lesser of 40 hours per week or their normal schedule.) This means full-time employees will accrue more than 24 hours of paid sick leave in a year. In fact, an employee working 40 hours a week would accrue 69 hours in a year. To address this, employers are allowed to implement accrual and use caps. Any caps must be explicitly stated in the employer’s policy.

• Employers may cap use of paid sick leave at 24 hours.
• Employers may cap accrual of paid sick leave at 48 hours.

The purpose of allowing employees to accrue more paid sick leave than they can actually use is so they will have sick leave available to use at the beginning of the next year. Thus, under the accrual method, employees must be allowed to carry over unused, accrued sick leave from one year to the next.

Example: Jessica qualifies for paid sick leave and her employer implements the accrual method on a calendar year basis, with 24-hour use and 48-hour accrual caps. As of October 1, 2016, Jessica had worked 1,560 hours. Jessica used 16 hours (2 days) of paid sick leave on October 1 and October 2 when she had the flu. Jessica worked 480 hours from October 3 through December 31, 2016.

• Jessica would have accrued 52 hours (6.5 days) of sick leave as of October 1 (1,560 hours ÷ 30), but her accrual was capped at 48 hours (6 days). Once she hit 48 hours, all accruals ceased until she used some sick leave to drop the accrued leave below the 48-hour cap.
• When Jessica used 2 days of sick leave, her accrued balance dropped to 32 hours (4 days), so she could begin accruing again.
• Jessica accrued 16 hours (2 days) of sick leave from October 3 through December 31 (480 hours ÷ 30), bringing her accrued total up to 48 hours (6 days).
• Jessica could have taken an additional 8 hours (1 day) of paid sick leave in 2016 before she hit the 24-hour use cap.
• 48 hours of Jessica’s unused accrued sick leave would carry over to 2017.

The Lump-Sum Method

• Accrual and carry over are not required under the lump-sum method.
• If an employee does not use all his/her sick leave in a year, he/she loses the hours and starts over with new hours at the beginning of the next year.

A benefit of the lump sum method is that it involves less record keeping. A drawback is that an employee could use all his/her sick leave before it would have accrued, and could then leave the company. (Keep in mind, however, that even though sick leave is given to an employee under the lump-sum method, initial hires must meet the 90-day employment requirement before they can actually use any sick leave.)

III. How is a Year Measured Under the Act?

The Act does not define how a year is measured, so employers must choose whether they want to use a calendar year, an anniversary year, a fiscal year, or some other 12-month period.

For employers who choose the lump sum method and want to provide sick leave on a calendar-year basis, because the Act is so new, it’s still unclear whether they can prorate for the first year (since the law goes into effect half-way through 2015) and when employees are hired part-way into the year. We expect to receive further clarification from the California Labor Commissioner on issues such as this prior to July 1, 2015. Until clarification is obtained, we do not recommend proration. To ensure compliance, employers who choose the lump sum method should provide all current employees at least 24 hours of paid sick leave in a lump sum on July 1, 2015, and each July 1 thereafter. Employees hired after July 1, 2015, should be provided at least 24 hours of paid sick leave in a lump sum on their hire date and the same date every year thereafter.

IV. Sick Leave Payment Requirements

Employees must be paid for sick leave no later than the payday for the next regular payroll period after the sick leave was taken. Employees must be paid at their regular hourly rate when they take paid sick leave. If the employee’s pay fluctuates (e.g., he/she earns commission or piece rate), employers must divide the employee’s total compensation for the previous 90 days by the number of hours worked and pay the employee that rate.

V. No Pay Out of Unused Sick Leave

Unlike vacation and paid time off, employees cannot cash out unused sick leave. If an employee leaves his/her job and gets rehired by the same employer within 12 months, he/she can reclaim the unused accrued sick leave.

VI. Employee Requests to Use Paid Sick Leave

Employers must permit employees to use paid sick leave upon oral or written request. Employers cannot require employees to find a replacement as a condition of using paid sick leave.

• If the need is foreseeable, the employee must give reasonable advance notice.
• If the need is unforeseeable, the employee need only give notice as soon as practicable.

VII. Record Keeping Requirements

Employers must show the number of paid sick hours an employee has available on:

• The employee’s pay stub/wage statement, or
• Document issued the same day as an employee’s paycheck.

Employers must keep records showing how many paid sick leave hours employees earned and used for 3 years.

VIII. Notice and Posting Requirements

Employers are required to display a poster containing information about the Act in a conspicuous place at the workplace.

The California Labor Commissioner developed a poster, which can be found here.  
Employers are required to provide employees with an individualized Notice to Employees that includes paid sick leave information. A Notice to Employee form can be downloaded from the DLSE website here.  

For employees hired before January 1, 2015, employers must notify them of changes to sick leave policies by July 8, 2015, at the latest. Even if an existing employer policy satisfies the minimum requirements of the law, employers must still provide specific notice to their employees containing information about the new paid sick leave law by July 8, 2015. Employers may use the revised DLSE notice form mentioned above or an alternative method that provides all information required by the new law – for example, a memo summarizing the policy and containing the points of information specified in the notice form.

IX. Retaliation Prohibited

Employers may not retaliate against employees who engage in protected activities related to the Paid Sick Leave Act and the law creates a rebuttable presumption of unlawful retaliation when an employer takes adverse action against an employee within 30 days of the date the employee:

• Files a complaint with the Labor Commissioner or alleges a violation of the Act;
• Cooperates with an investigation or prosecution of an alleged violation of the Act; or
• Opposes any policy, practice, or act that is unlawful under the Act.

X. What if an Employer Has its Own Paid Time Off (PTO) Plan?

The new paid sick leave law only establishes minimum requirements – an employer can provide sick leave through its own sick leave or PTO plan, and it can establish different plans for different categories of workers. The PTO plan must provide at least 24 hours of paid leave that can be used for health care and meets other requirements of the law. It must satisfy the accrual, carry over, and use requirements of the Act or provide employees with the full amount of leave at the beginning of the year.
Accrual and use of sick leave must be tracked and reported to employees each pay date. Policies allowing unlimited sick days don’t comply with the Act, unless the employer tracks and reports available sick time each pay period.

XI. Penalties

Penalties are strict, so compliance is important.

• Failure to display a poster containing information about the Act: $100 penalty per offense.
• For every paid sick day unlawfully withheld, employees shall recover the dollar value of the paid sick days withheld multiplied by 3 or $250, whichever is greater, not to exceed an aggregate penalty of $4,000 per employee.
• If an employer engages in other violations (such as failure to show hours available each time wages are paid), the maximum penalty shall include a sum of $50 a day, not to exceed an aggregate penalty of $4,000 per employee.

The Labor Commissioner is charged with the law’s enforcement and regulation. Upon finding a violation of the law, the Labor Commissioner may order any appropriate relief including reinstatement, back pay, payment of unlawfully withheld sick days, administrative penalties, and enforcement fines payable to the state. The law also authorizes the Labor Commissioner or the Attorney General to institute a civil action on behalf of aggrieved employees to seek reinstatement, back pay, administrative penalties, liquidated damages, and reasonable attorney’s fees.

Individuals may also bring a civil action under the California Private Attorney General Act (PAGA) on behalf of similarly aggrieved employees, but recovery excludes PAGA penalties and is limited to restitution, equitable or injunctive relief, and reasonable attorney’s fees and costs.

XII. Summary: Steps Every Employer Should Take to Comply with the New Law

• Post information about the Paid Sick Leave Act.
• Implement a written policy setting forth your company’s sick leave policy.
• Distribute the policy to all current employees and incorporate into your handbook.
• Provide all new employees with a Notice form including information about your Company’s sick leave policy.
• Properly document employees’ available sick time on their wage statements or other document provided to them on payday.
• Timely pay employees after they take paid sick leave.

Prepared by Jennifer Branch and Jessica Yang. Please contact the employment attorneys at Lagasse Branch Bell + Kinkead LLP with any questions about this blog post or any other employment-related needs.