On July 13, 2015, the legislature amended California’s paid sick leave law to address a number of deficiencies in the statute (AB 304). The urgency legislation provides alternatives to the accrual method, clarifies the frontloading option and provides a safe harbor for certain paid time off policies that existed prior to January 1, 2015, among other important clarifications or changes.   The amendments take effect immediately.

Alternative accrual methods

The amendments provide two alternatives to the requirement that paid sick days accrue at the rate of not less than one hour per every 30 hours worked.

  • Employers can use a method that provides for accrual on a regular basis so that employees will have no less than 24 hours of accrued sick leave or paid time off available by the 120th calendar day of employment, or each calendar year, or in each 12 month period.
  • Employers can provide no less than 24 hours or three days of paid sick leave that is available to the employee to use by the completion of his or her 120th calendar day of employment. (We are waiting for guidance from the Labor Commissioner regarding the types of policies that might satisfy this alternative.)

These alternatives may provide some relief to employers whose employees work substantial amounts of overtime or whose automated systems track and accrue paid time off based on days or payroll periods worked rather than hours worked.

Clarifying the frontloading option

Pre-amendment, employers could satisfy their obligations to provide paid sick leave and avoid the accrual and carry over requirements by frontloading the “full amount of leave” at the beginning of each year of employment, calendar year or 12 month period. The statute did not define “full amount of leave.” So employers who sought the simplicity of the frontloading option and who also wanted to provide more than 24 hours or three days of sick leave, were uncertain about whether they must grant all the paid sick leave or paid time off up front each year. The amendments clarify that “full amount of leave” means three days or 24 hours.

Safe harbor for certain existing PTO policies

Many employers have found it difficult to integrate the required one hour of leave per 30 hours worked accrual rate with existing PTO policies, especially when the policy provides for accrual on a basis other than hours worked or employees work substantial amounts of overtime. The amendments provide a safe harbor for PTO policies that use a different accrual method if the policies satisfy certain requirements. First, the employer must have provided paid sick leave or paid time off to a class of employees before January 1, 2015, pursuant to a sick leave policy or paid time off policy. Second, the policy must provide for accrual on a regular basis so that employees, including employees hired after January 1, 2015, have no less than one day or eight hours of accrued sick leave or paid time off within three months of employment, or each calendar year, or each 12 month period. Third employees must be eligible to earn at least three days or 24 hours of paid sick leave or paid time off within nine months of employment.  An employer is not required to provide additional sick days if its existing PTO policy meets these requirements.

Note that if an employer modifies the accrual method it had in place prior to January 1, 2015, the employer will be required to comply with the accrual, use, and carry over requirements of the paid sick leave law or provide the full amount of the paid sick leave at the beginning of each year of employment, calendar year, or 12 month period. But an employer may increase the accrual amount or rate without falling out of this safe harbor.

No reinstatement of PTO or sick leave paid out on termination

The amendments make it clear that employers are not required to reinstate accrued paid time off for employees who are rehired within one year of separation from employment if the paid time off was paid out at the time of termination, resignation or separation.

Paystub requirements for unlimited paid sick leave or PTO

Employers with unlimited sick leave or paid time off policies can satisfy the requirement to indicate the amount of paid sick leave available on itemized wage statements by indicating “unlimited” on those statements.

Calculating paid sick leave for nonexempt employees

The amendments clarify and simplify the process for calculating the rate of pay for paying sick leave to nonexempt employees.

  • An employer may calculate paid sick time for nonexempt employees in the same manner as it would calculate the regular rate of pay for the workweek in which the employee uses paid sick time.
  • An employer may calculate paid sick time 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.

No obligation to inquire

Employers are not obligated to inquire into or record the purposes for which an employee uses paid leave or paid time off.

The Labor Commissioner is currently revising the answers to frequently asked questions. Look for an update here.