This month, the California Legislature enacted AB 304, an urgency measure that became effective on July 13 and provides much needed clarity on various aspects of California’s mandatory paid sick leave law (Healthy Workplaces, Healthy Families Act of 2014), which went into effect on July 1. Below are the highlights; the full text of the law is here:

  • Unlimited Sick or Paid Time Off — In order to comply with the requirement that employees must receive notice of their available leave balances either on their wage statements or a separate writing accompanying payment of wages, employers with unlimited sick or time off policies can simply state “unlimited” on the applicable document.
  • Recordkeeping — Employers have no obligation to inquire into or record the purpose for which employees use sick leave or paid time off. If a company has a combined or even an unlimited paid time off policy, it need not require employees to code their time off as sick time in order to comply with the recordkeeping section of the statute. This conflicts with prior advice from the Department of Labor Standards Enforcement (“DLSE”) in the form of an FAQ stating that employers with unlimited policies must “separately track sick leave accrual and use.” The DLSE is reviewing AB 304 and revising its FAQs, which should be posted soon.
  • Alternative Accrual Method — Employers now have options for calculating accrual of paid leave other than as originally specified in the statute (i.e., one hour for every 30 hours worked), provided the accrual is on a regular basis and the employee will receive no less than 24 hours of accrued sick time (or other paid time off) by the 120th calendar day of employment or each calendar year, or in each 12-month period.
  • Lump Sum — No accrual or carry over is required if the full amount of leave is provided at the beginning of each year of employment, calendar year, or 12-month period. Alternatively, employers can satisfy the accrual requirement of the statute by providing not less than 24 hours or three days of paid sick time (or other paid time off) that is available to the employee to use by the completion of his or her 120th calendar day of employment.
  • Existing Policy — If employers already have a paid sick or paid time off policy, they need only make available an amount of leave that may be used for “the same purposes and under the same conditions” as specified in the statute, and the policy must satisfy one of the following:
    • Satisfy the accrual, carry over, and use requirements of the statute; or
    • Have provided paid sick leave or paid time off to employees before January 1, 2015 pursuant to a policy that used an accrual method different than originally provided under the statute (i.e., one hour for every 30 hours worked) if (1) the accrual is on a regular basis so that an employee has no less than one day or eight hours of accrued sick leave or paid time off within three months of employment of each calendar year, or each 12-month period and (2) the employee was eligible to earn at least three days or 24 hours of sick leave or paid time off within nine months of employment. If an employer modifies the accrual method used in the policy it had in place prior to January 1, 2015, it must comply with any of the accrual methods set forth in the statute (Cal. Lab. Code § 246(b)) or provide the full amount of leave at the beginning of each year of employment, calendar year, or 12-month period.
  • Limit on Leave — Employers can still limit an employee’s use of accrued sick leave to 24 hours or three days in each year of employment, calendar year, or 12-month period.
  • Rate of Pay — Employers can calculate paid leave for non-exempt employees using one of two options: (1) the regular rate of pay for the workweek in which the employee uses paid sick time or (2) dividing the employee’s total wages (excluding overtime premium pay) by the employee’s total hours worked in the full pay periods of the prior 90 days of employment. Most employers will likely choose the first option, since most payroll systems already calculate employees’ regular rate of pay. Exempt employees should be compensated at the same rate used for other forms of paid leave such as vacation.
  • Same Employer — Employees must work for the same employer for at least 30 days within a year from the beginning of employment to be eligible to accrue paid sick time with that employer.
  • Rehire — Employees who are paid out accrued paid time off upon separation and then are rehired within one year are not entitled to have their paid time off reinstated.

In light of these and other changes, employers should consult with counsel and revise their time off policies and procedures accordingly.