The California paid sick leave law provided a significant boon to employees not included under employers’ sick leave or paid time off policies, but it often created more questions than answers for companies. How do we calculate one hour of paid sick leave for salaried employees? How should we record accrued sick leave on wage statements if we offer unlimited paid time off to everyone? What does the word “year” mean for a law that references “calendar year” but started on July 1st? If we provide PTO to everyone does this law affect us at all?
The law came without any interpretive regulations, and employers have had to monitor the State’s Frequently Asked Questions website for the closest thing to sanctioned guidance.
Fortunately, employers just received clarity on some of the most common questions via amendments signed into law by Governor Brown on July 13, 2015. The Legislature amended the Act in several respects.
An employee must work 30 days for the same employer within a year of commencing employment to be entitled to paid sick days under the law.
Employers may utilize a new, more flexible accrual approach: any accrual method is sufficient so long as an employee has no less than 24 hours of accrued sick leave or paid time off by the 120th day of employment, calendar year, or in each 12-month period. Additionally, employers satisfy the accrual requirements by providing 24 hours of paid sick leave to the employee upon the completion of their 120th calendar day of employment. For example, employers may provide paid time off that accrues on a weekly or monthly basis and regardless of actual hours worked so long as the accrual rate is not less than 1.4 hours per week.
For non-exempt employees, employers may choose one of two methods of calculation: (1) in the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time, regardless of whether the employee actually works overtime in that workweek; or (2) by dividing the employee’s total wages – not including overtime pay – by the employee’s total hours worked in the pay periods of the prior 90 days. For exempt employees, employers must utilize the same rate used for other forms of paid leave.
Unlimited PTO Policies
Employers may simply write “unlimited” on wage statements or in a contemporaneous, separate writing.
Definition of “Year”
“Year” can mean each year of employment, each calendar year, or any continuous 12-month period.
PTO plans in existence before January 1, 2015, may be grandfathered in under certain circumstances. Specifically, the plan must have provided for accrual of sick leave or paid time off at a rate where employees accrue at least one day or eight hours of paid sick leave or paid time off within 3 months of employment, each calendar year, or each 12-month period, and at least three days or 24 hours of paid sick leave or paid time off within nine months of employment. If an employer modifies the accrual rate under their pre-existing plan, it will lose the safe harbor. Preexisting plans must be expanded, if needed, to cover all reasons for paid leave provided under the law.
If an employee returns to work within a year of termination, employers need not reinstate any accrued sick leave time that was paid out at the time of termination, which may occur when paid sick time and vacation time are combined into a single PTO policy. However, if such sick leave is not paid out and the employee is rehired within one year, accrued and unused sick leave shall be reinstated.
Employers are not obligated to record the purposes for which an employee uses paid sick leave or paid time off.
Finally, in a clarification obtained directly by Mintz Levin and not codified in the amendments, employers must provide employees with a notice of their accrued paid time off or sick leave even if that employee participates in a qualifying PTO plan and is otherwise exempt from the law.
To be sure, many unanswered questions remain. The State has set up an email alert program for employers that wish to stay on top of latest developments, and all employers should still monitor the State’s Frequently Asked Questions page.