We recently held a webinar titled California’s New Paid Sick Leave Law: Are you Ready for the Big Changes Ahead? to help prepare employers for California’s new paid sick leave law.  More than 400 people registered for the webinar, and we received well over 100 participant questions.

We realized that everyone — including those who could not attend the presentation — would benefit from viewing the questions and our responses. The full Q&A follows.

While we have answered all general questions below, we encourage you to speak directly with your Proskauer lawyer to ensure that your particular company policies are fully compliant.

Topics:

Accrual Method

Given that overtime is included in the accrual of the 30 hours, would double time be included as well?

Yes, all hours worked should be considered when calculating accrual.

Does the annual PTO cap have to be 1.75 x annual accrual?  Or is it just 15.75 days minimum?

The accrual cap is calculated based on the employee’s annual accrual.  California courts have not specified the minimum multiplier permitted, but administrative guidance indicates that a cap of 1.75 times annual accrual is permitted.

If an employer uses an accrual method and caps the accrual at 48 hours, what is the requirement to carry those forward assuming no days are used?  Would an employee have 96 hours at the end of the 2nd year if no hours were used?

Under an accrual method, the employee must be permitted to carry over all hours accrued.  This is why we recommend instituting an accrual cap of 48 hours, so an employee will not accumulate sick leave in excess of 48 hours.

For employees hired before July 1st, does the accrual start with their hire date?  And what is the earliest date they can begin taking sick leave?

Employers do not need to permit employees to accrue sick leave until July 1, 2015.  Employees must be permitted to use accrued sick leave on their 90th day of employment.

Under accrual method, does vacation time count as time worked for accrual purposes?

No, employers only need to count actual hours worked for accrual purposes.

If an employee uses the accrual method, can it cap the number of days accrued at six and limit employees to using 3 days in a year?

Yes, under an accrual method, the employee must be permitted to accrue up to 48 hours per year.  However, the employer can limit the employee’s sick leave use to 24 hours per year.

Given that an employer can cap usage at 24 hours, what happens to the hours the employee does not use?

Under an accrual method, employees must be permitted to accrue at least 48 hours of sick leave per year.  However, the employer may cap an employee’s sick leave use at 24 hours per year.  After using 24 hours of leave, the remaining leave stays in the employee’s sick leave bank and can be used during the following year.

How many paid sick days are employers required to provide to employees?

There are different accrual minimums depending on which accrual method employers choose.  Under the lump sum method, an employer meets the law’s requirements by providing employees with 3 paid sick days at the beginning of the year.  If an employer only has a PTO policy, and chooses an accrual method, it needs to provide employees with one hour of PTO for every 30 hours worked.  For a full-time employee, this would mean accruing approximately 9 days of PTO per year.  We recommend consulting with legal counsel to determine which plan is best for you and to ensure compliance with the law’s requirements.

If an employee accrues 9 days of PTO annually, that assumes 40 hours a week of work and would be more if an employee works a lot of overtime?

If an employer only has a PTO policy, and chooses an accrual method, it needs to provide employees with one hour of PTO for every 30 hours worked.  For a full-time employee that works 40 hours per week, this would mean accruing approximately 9 days of PTO per year.  However, if the employee works more than 40 hours per week, then yes, the employee would need to receive additional PTO.

Calculating Sick Pay

With regard to calculating pay, what if the person who is commissioned is exempt and doesn’t track hours?  Do you assume 40 hours?

That is correct.  Unless an exempt employee’s workweek is set at something other than 40 hours, presume 40 hours for accrual purposes.

Carryover

If an employer provides 3 sick days at the beginning of the year, it does not need to carry the days over into the next year, correct?

Yes, if an employer provides employees with 3 sick days at the beginning of the year, the employer does not need to permit carry over from year to year.

Can the 3 sick days roll over to the following year?

This answer depends on the accrual method that a company uses.  If the company offers all 3 days in a lump sum at the beginning of the year, it does not need to roll over unused sick leave to the following year (though it would be allowed to roll unused sick leave over if it wants).  If the company offers accrued sick leave, then it must allow unused sick leave to roll over.

Determining Eligibility

For those who have employees outside CA, how do you determine whether someone is qualified for the entitlement starting July 1, 2015?  Are employers expected to look back over the course of the six months prior to determine eligibility?

The DLSE states that, as of July 1, employers must offer sick leave to all employees who have worked at least 30 days in California since January 1, 2015.

Is sick defined?

Employees can use paid sick leave for the diagnosis, care, or treatment of an existing health condition of, or preventive care for, an employee or an employee’s family member. The term “family member” is defined broadly and includes children, parents, grandparents, grandchildren, siblings, and registered domestic partners, among others.  In addition, sick leave can be used by victims of domestic violence, sexual assault, or stalking.

Does this apply to part-time employees as well?

Yes, the law requires that employers provide sick leave to any employee who works in California for at least 30 days within a given year, including part-time, temporary, and/or seasonal employees.

Independent Contractors

Do these policies apply to my 1099-contractors, or just employees?

The California Sick Leave law does not create an obligation to provide sick leave to independent contractors.  However, we recommend consulting with counsel to ensure that your company is properly classifying workers as independent contractors rather than employees. If a company improperly classifies a worker as an independent contractor, it could potentially face liability for improperly failing to offer sick leave to the worker.

Interplay with Other Laws

What is the interplay between California and San Francisco paid sick leave?

Employers with San Francisco operations must comply with all requirements of the California and San Francisco sick leave laws.  We recommend consulting with legal counsel to ensure that all requirements have been met.

Lump Sum

Under the lump sum method, what happens once an employee uses its 3 sick days?  Does it switch to accrual at that point?

If an employer provides employees with 3 sick days at the beginning of the year, the employer does not need to provide additional sick days.

If an employer front loads the 24 hours, how would the employee accrue the additional 24 hours?

If an employer provides employees with 3 sick days at the beginning of the year, the employer does not need to provide additional sick days.

If a company grants lump sum at the beginning of a fiscal year, April 1, would that be a qualified lump sum method?

Yes, the lump sum can be provided at the beginning of a fiscal year.

If an employer chooses the lump sum method, it only has to offer 3 days as opposed to 6 days of paid leave?

Correct.  If an employer provides employees with 3 paid sick days at the beginning of the year, the employer does not need to provide additional sick days.

If we grant 3 days lump sum on January 1 each year, how much paid sick leave should we grant to current employees on July 1, 2015?

This issue is not specifically addressed by the sick leave law.  Therefore, the safest approach would be to offer the full 3 days of paid sick leave on July 1, 2015.

Can employers still implement an accrual cap with the lump sum method?

Yes, if employers offer lump sum accrual, they can institute an accrual cap.  Also, under lump sum accrual, employers do not need to allow employees to carry over unused sick leave from one year to another. 

The Lump Sum method doesn’t require much record keeping, given that it is 3 days at the start of the year, correct?

The lump sum method has reduced administrative requirements because employers do not need to track accrual and do not need to track carry over from one year to another.  However, employers still need to comply with all recordkeeping requirements.

If an employer uses the lump sum method, does that have to be a separate “Paid Sick Leave” bucket?  Or, if an employer’s “Unplanned Absence” days are 24 hours/3 days or more as of January 1st and can be used for the same reasons, is that in compliance with the Lump Sum Method?

Employers do not need to offer a specific “paid sick leave” bucket.  Rather, employers can meet the law’s requirements by offering an amount of leave that satisfies the accrual requirements and that can be used for the purposes required by the sick leave law. 

Does the 3 day lump sum method require a separate policy?  Or can an employer add the 3 days to PTO balance at the beginning of the year and then the employees can accrue the rest of their PTO per our existing accrual rates?

Depending on the situation, it appears that one policy that offers 3 days of PTO at the beginning of the year, and then offers PTO at a different accrual rate, would violate California law regarding PTO accrual.  We recommend consulting with legal counsel to discuss the specifics of this issue.

With regard to the lump sum method, what if an employee starts in the middle of the year?   Can the minimum be prorated or do all employees get 3 days regardless of when they start?

This issue is not specifically addressed by the sick leave law.  Therefore, the safest approach would be to offer the full 3 days of paid sick leave on the employee’s start date.

Under the lump sum method, can employers have a waiting period for new hires during the year as long as all other employees get a lump sum number of days (greater than 3) on January 1st?

The answer depends on what employers plan to offer new hires.  For instance, they can offer new employees sick leave under an accrual method and offer lump sum accrual to employees who are employed on January 1.  However, we recommend consulting with legal counsel to ensure that your policies comply with the accrual requirements under each method.

Medical Certification

Is an employer required to request a doctor’s note?

No, the employer is not required to request a note from the employee’s doctor.

Can employers require a doctor’s note?

The sick leave law is silent on whether an employer can or cannot request a note from a health care provider.  We recommend consulting with legal counsel to discuss the risks and benefits of requesting such a note.

Notice Requirements

We have 3 exempt employees who reside in California.  They have unlimited sick days.  Are we required to notify them of this in any way other than what is in our handbook?

Yes, employers must comply with the sick leave law’s notice, posting, and recordkeeping requirements regardless of the amount of sick leave provided.

If a current policy is much more generous than the law provides, is there any relief from these requirements? Unfortunately, the law’s accrual, notice, posting, and recordkeeping requirements all apply, even if the employer has a policy that is more generous than required.

Penalties

Is there a specific penalty for not reporting sick days on a wage statement or other writing (or reporting the wrong balance by mistake), provided employees were allowed to use sick time properly?

Yes, failure to comply or failure to provide accurate information could result in a penalty of $50 per day, up to a maximum of $4,000 per person.

Policy Review

Is there a resource that can review our current policy to see if we are in compliance?

Proskauer has reviewed many companies’ policies and advised them concerning compliance.  If you would like to have Proskauer review your policy, please reach out to your Proskauer relationship attorney.  Alternatively, if you do not have an existing relationship with Proskauer, please contact us to discuss establishing a relationship.

Reinstatement of Employment within One Year

If an employee leaves and has accrued 48 hours of sick leave and then returns within one year, does the employee’s accrual start up again in addition to those 48 hours?

If an employee resumes employment within one year, they must receive their previously accrued but unused sick leave upon reinstatement.  The employee will also resume accruing sick leave, subject to your sick leave policy.

Can returning employees use ‘previous’ time even if they were paid out when they left?

The sick leave law does not require employers to pay out unused sick leave upon separation of employment.  The sick leave law does not address an employer’s obligations under such circumstances.  We recommend consulting with legal counsel to discuss the best approach for you to take in this situation.

At what point is an employer not required to reinstate sick leave?

If an employee resumes employment within one year, they must receive their previously accrued but unused sick leave upon reinstatement.  If an employee has been gone for more than one year, then the employer would not be required to reinstate the employee’s sick leave upon return.

Separate Policies for Different Groups of Employees

Can you have different plans for full-time and one for part-time employees?

Yes, in general, employers can have separate sick leave plans for full-time and part-time employees, as long as both plans meet the law’s accrual requirements.  However, beginning July 3, 2015, a San Francisco ordinance that affects retail chains becomes effective, which requires that part-time employees receive the same leave benefits as full-time employees (though the benefits can be prorated based on hours worked).  The San Francisco ordinance contains numerous burdensome requirements for your San Francisco locations.  Please let me know if you would like to discuss these requirements.

Is it possible to use a combined method of accrual and lump sum?  For example, allowing new employees to accrue sick time during the year they were hired, then at the beginning of the next calendar year, all current employees get a lump sum?

Yes, employers can offer employees sick leave under an accrual method for their first year of employment and offer lump sum accrual to employees who have worked for you for greater than one year.  However, we recommend consulting with legal counsel to ensure that your policies comply with the accrual requirements under each method.

Sick Leave Usage

Can an employer require sick leave be used in a 4-hour increment?

No, employees need to be permitted to use sick leave in increments of two hours or more.

Can employers permit employees to use sick leave in 1-hour increments?

Yes, employers can allow employees to take leave in one hour increments.

Do we have to have the 2-hour rule (whereby employees can use increments of 2 hours of PTO) in place for all U.S. employees, or just California?  Alternatively, can we state in PTO policy that we don’t require use of PTO for time off less than 4 hrs?

The sick leave law’s requirements that we discussed only apply to California employees.  Also, yes, you can state that employees do not need to use their PTO for leave of fewer than four hours, as long as employees will be permitted to leave the office in two hour increments, and receive pay for this time.

What if a vacation or PTO policy requires that employees use it in 4-hour increments?

In order for a PTO policy to meet the sick leave law’s requirements, employees must be permitted to use the PTO for the same purposes required by the sick leave law.  Therefore, we would recommend allowing employees to take PTO in 2 hour increments.

Sick Pay Upon Termination

Does accrued but unused sick time need to be paid out at termination?

No, if an employer offers separate sick leave that is not combined with vacation time or PTO, accrued sick leave does not need to be paid upon termination.

If employee terminates can you take the $$ back from final pay?

Employers generally cannot take back money paid to employees.  However, you do not need to pay employees for unused sick leave upon termination.

Temporary Employees

If a company uses temps, does it or the temp agency have to provide the temps sick leave?

Technically, if a temporary services agency is the worker’s employer, then the agency is responsible for complying with the California sick leave law.  However, effective January 1, 2015, California employers are automatically liable for Labor Code violations by their contractors.  Therefore, we recommend ensuring that your temporary services agency complies with this law.

Unions

How can employers qualify for the Collective Bargaining Agreement exemption?  Must the CBA itself specifically and expressly provide for sick leave for all of the reasons that are enumerated in the statute?

There are several requirements that employers must meet in order for the Union exemption to apply.  We recommend consulting with legal counsel to determine whether you are in compliance.

Using Other Types of Leave to Comply with the Sick Leave Law

Do employers have to have a specific “sick leave policy”?  Or, can they provide for PTO that can be used for sick leave?

Employers do not need to offer a specific “paid sick leave” bucket.  Rather, employers can meet the law’s requirements by offering an amount of leave that satisfies the accrual requirements and that can be used for the purposes required by the sick leave law.

What if employers have an unlimited PTO policy?

An unlimited PTO policy can be compliant if it meets the sick leave law’s accrual requirements and it allows employees to use the PTO for the same purposes required by the sick leave law.  We recommend consulting with legal counsel to determine whether your policy meets all of the requirements.

If a company uses PTO to satisfy the obligation and an employee exhausts his/her PTO during the calendar year, but gets sick later in the year, does the company have to provide those sick days?

If a PTO policy satisfies the sick leave law’s various requirements, including accrual and usage requirements, then the employer is not required to provide additional paid sick leave once the employee exhausts his or her accrued PTO. 

Is an unlimited sick leave policy sufficient?

If employers offer unlimited sick time that can be used for the same purposes required by the sick leave law, then they will meet the law’s accrual requirements.  However, employers still need to make sure that you meet the law’s other requirements, including notice, posting, and recordkeeping.

If a company provides unlimited sick time, then does it have to allow employees to use their sick time for requirements, such as caring for a family member, etc.?  In other words, can the company restrict employees to using leave for their own illness?

If employers do not allow employees to use their leave to care for a family member, then they will not satisfy the requirements of the new sick leave law.  We recommend consulting with legal counsel to determine the best approach for you to revise your policies to ensure compliance.

Vacation Time

In terms of paid vacation, the verbiage listed says it “should” never be treated on a use‑it‑or‑lose-it basis.  Does that mean in some instances it can be?

We stated that employers should not cause employees to lose vacation time because doing so would be unlawful.  We did not mean to suggest that employees can be caused to forfeit accrued vacation time under certain circumstances.

Wage Statements

Is the paystub the only way to provide the sick leave balance?

Employers can provide employees with their sick leave balance in their pay stub or in a separate writing provided on payday.

Is it sufficient to provide the Sick Hour balance in an electronic format, such as ADP Employee Self Service Portal?

The statute requires employers to provide employees with a written notice that sets forth the amount of paid sick leave available “on either the employee’s itemized wage statement …  or in a separate writing provided on the designated pay date with the employee’s payment of wages.”  The law does not specify whether employers can comply with this requirement by providing employees with an electronic link to their sick leave balance, and the legislature and California administrative agencies have not provided any guidance on this topic.  Notably, with respect to California Labor Code Section 226’s wage statement requirements, the California Department of Labor Standards Enforcement has stated that “an electronically stored wage statement which is accessible by an employee” qualifies as a “statement in writing.”  Therefore, it stands to reason that employers can comply with the sick leave law’s requirements by providing an electronic notice that employees can access.  Nonetheless, without specific guidance on this topic, uncertainty remains as to whether an electronic statement will suffice.

Wage Theft Prevention Act Notice

Since employers are not required to provide exempt employees with an individualized wage notice under 2810.5, does it follow that employers are not required to give individual notice about the sick leave law to current exempt employees (unlike current nonexempt employees)?

That is correct.  Employers are only required to provide updated notice pursuant to Section 2810.5 to current nonexempt employees.

Is this Wage Theft Prevention Notice required only for California nonexempt employees or all employees in the US?

California Labor Code Section 2810.5 requires distribution of a Wage Theft Prevention Act notice to nonexempt employees in California.  We recommend consulting with legal counsel concerning similar requirements in other states where you conduct business.

Can employers satisfy the notice of changes requirement with a posting? Or are employers required to send separate mailings to all California employees?

If the company makes changes to its sick leave policy, the Wage Theft Prevention Act requires the company to notify all nonexempt employees in California of these changes via a written notice.

When to Offer Sick Leave

When using the lump sum method, does 90 day probationary apply?

The employee should receive the lump sum of sick days at the beginning of employment.  However, employers can preclude the employee from using the sick days until the 90 day probationary period concludes.

If employers do not offer the PTO until after completion of 1 year, do they still need to offer paid sick time during the first year?

Yes, employers should offer their employees sick leave accrual upon hire.

Can employers have a New Hire waiting period of 90 days to begin accruing PTO?

Employees should be permitted to accrue sick leave upon hire.  However, you can institute a rule stating that employees cannot use their sick leave until they have been employed for 90 days.