Seyfarth Synopsis: With the New Jersey Paid Sick Leave Act’s October 29, 2018 effective date rapidly approaching, the state recently released proposed Earned Sick Leave Rules. However, it looks very likely that the rules will not be finalized until after the Act goes into effect.

The New Jersey Paid Sick Leave Act (“the Act”) goes into effect on October 29, 2018 – approximately one month from now. As employers prepare for the statewide mandate, on September 13, 2018, the New Jersey Department of Labor and Workforce Development (the “Department”) released its long-awaited proposed Earned Sick Leave Rules (the “Proposed Rules”). Notably, a public hearing on the Proposed Rules is scheduled for November 13, 2018. The corresponding written comment period ends on December 14, 2018. Thus, it appears that New Jersey’s final sick time rules will not be released until at least several weeks after the Act goes into effect.

As discussed further below, there are certain areas of the Proposed Rules that appear to be inconsistent with certain standards set forth in the Act. Until the state’s final sick leave rules are issued, employers should follow the requirements of the Act.

When the Act becomes effective, New Jersey will be the tenth state in the country with an active statewide sick leave mandate.[1] In addition, and notably, the Act will preempt the state’s 13 existing municipal paid sick leave (“PSL”) ordinances.[2]

By way of background, the Act will require covered employers to allow eligible employees to accrue PSL at least as fast as one hour of PSL for every 30 hours worked, up to 40 hours per year. Employers will not be required to permit employees to use more than 40 hours of PSL in any benefit year or carry over more than 40 hours of unused sick leave to the following benefit year. Although employers may frontload 40 hours of sick leave on the first day of the benefit year instead of allowing employees to accrue the leave, the Act does not allow employers to adopt a “use it or lose it” approach. As explained below, frontloading PSL is among the various topics covered in the Proposed Rules.

For more information on the Act’s substantive requirements, please see our prior alerts here, here, and here.

Here are some highlights of the Proposed Rules:

  • Benefit Year: The Proposed Rules maintain the Act’s definition of “benefit year” and corresponding requirement that the employer notify the Department’s commissioner of any planned changes to the PSL benefit year. The Proposed Rules state that the employer must provide this notice to the commissioner at least 30 days prior to the proposed change in benefit year. In addition, the Proposed Rules expressly note that the employer must establish a single benefit year for all employees.
    • Notice to Department: The Proposed Rules require the employer’s notice to the Department to (1) be in writing, (2) specify the existing and proposed new benefit year, (3) indicate the effective date of the new benefit year and reason for the change, and (4) include a list of current employees, including their contact information, and a history of PSL accrual, payment, payout and carryover during the prior two benefit years.
  • Frontloading: The Proposed Rules confirm that employers may provide employees with no less than 40 hours of earned sick leave on the first day of the benefit year for use throughout the benefit year, as opposed to allowing employees to accrue PSL. Importantly, the Proposed Rules reinforce language in the Act stating that frontloading PSL each year does not permit employers to follow a “use it or lose it” approach for unused time at year-end. Instead, employers must either (1) provide employees with a payout for the full amount of unused earned sick leave or (2) permit employees to carry-over up to a total of 40 hours of accrued, unused earned sick leave. The 40-hour carryover limit clarifies a gray area in the Act, which could be read as permitting all unused PSL to carryover under these circumstances.
  • Family Member: The Act’s definition of “family member” includes, among other relationships, any other individual related by blood to the employee or whose close association with the employee is the equivalent of a family relationship. The Proposed Rules explain that this relationship means “any person with whom the employee has a significant personal bond that is, or is like, a family relationship, regardless of biological or legal relationship.”
  • Usage Waiting Period: The Proposed Rules appear to diverge from language provided under the Act regarding PSL usage waiting periods. At a high level, the Act and Proposed Rules both impose a 120 calendar day PSL usage waiting period for employees hired after on or October 29, 2018. However, how they handle the usage waiting period for existing employees, i.e., those hired by an employer before October 29, do not match.
    • The Act: The Act expressly states the following – “earned sick leave shall begin to accrue on the effective date of this act for any employee who is hired and commences employment before the effective date of this act and the employee shall be eligible to use the earned sick leave beginning on the 120th calendar day after the employee commences employment.” (emphasis added). This language strongly suggests that existing employees who have been employed for at least 120 calendar days at the time the Act goes into effect, i.e., any employee hired on or before June 30, 2018, will be entitled to use PSL under the Act as soon as it accrues. Similarly, it implies that employees hired between July 1 and October 28, 2018 get credit for their employment period prior to the effective date (i.e., An employee hired on September 1, 2018 would be entitled to begin using accrued PSL 62 calendar days after October 29 as she had been employed for 58 calendar days before the effective date).
    • The Proposed Rules: Subject to an exception noted below, the Proposed Rules state the following – “an employee shall not be eligible to use earned sick leave until February 26, 2019 (the 120th calendar day after October 29, 2018), or the 120th calendar day after the employee commences employment, whichever is later.” (emphasis added). Barring changes when the rules are finalized, this Proposed Rule language suggests that the 120 calendar day waiting period applies to all employees, not just employees hired after the effective date. It is unclear whether this apparent contradiction will be clarified by the state in forthcoming final rules or other administrative guidance.
    • Exceptions: The above usage waiting period language in the Act comes with a possible, although vague, caveat which reads as follows – “Unless the employee has accrued earned sick leave prior to the effective date of this act.” The Proposed Rules presumably used this language to create the following exception to their version of the usage waiting period – “Where the employee has accrued earned sick leave prior to October 29, 2018, he or she shall be eligible to use that earned sick leave prior to February 26, 2019 (the 120th calendar day after October 29, 2018).” Thus, employers of employees who have accrued sick leave under any of the 13 existing New Jersey municipal PSL ordinances or other employer policy could potentially be required to permit employees to use this time prior to February 26, 2019.
  • Limitation of Prohibiting Foreseeable Leave on “Certain Dates”: Although the Act permits employers to prohibit the use of foreseeable PSL on certain dates (and permits employers to request verification if an employee uses unforeseeable leave on those dates), the Proposed Rules provide that the “certain dates” must be limited to verifiable high-volume periods or special events, during which permitting the use of foreseeable earned sick leave would unduly disrupt the operations of the employer. The Proposed Rules provide certain examples, such as holidays for airlines and the release of a new product for retailers. The Proposed Rules further require that the employer provide reasonable notice to its employees of the “certain dates” on which foreseeable PSL is not permitted.
  • Notice and Posting Obligations: The Proposed Rules reiterate that employers must (A) conspicuously post a notice of employee rights in each of the employer’s workplaces, and (B) provide each employee with a written copy of the notice at the following times: (1) no later than 30 days after the notice has been issued; (2) at the time of the employee’s hiring (if hired after the issuance of the notice); and (3) upon the first request of an employee. The Proposed Rules provide that an employer may satisfy the posting requirement by posting the notice on an internet or intranet site that is available for the exclusive use of its employees and to which all employees have access. Further, the Proposed Rules allow an employer to satisfy the individual written notice requirement by providing the notice to employees via email. The Department has not yet published the model PSL notice.
  • Reasonable Documentation: The Act states that employers may require employees to submit reasonable documentation if they use PSL for three or more consecutive days, or, as noted above, if the employee uses sick leave for an unforeseeable absence on “certain dates” identified by the employer. The Act provides examples of what is considered reasonable documentation if the employee’s absence is for sick time, related to domestic or sexual violence, or due to a public health emergency. The Proposed Rules expand on these examples and note that if an employee is absent due to a covered school-related event, reasonable documentation includes “tangible proof of the school-related conference, meeting, function, or other event requested or required by a school administrator, teacher, or other professional staff member responsible for the education of the employee’s child.”
  • Payment of Sick Leave: The Act states that an employer must pay an employee for earned sick leave at the same rate of pay with the same benefits as the employee normally earns. The Proposed Rules provide sick time payment standards for employees who (a) work two or more different jobs for the same employer or otherwise have fluctuating pay rates, (b) are paid by commission, or (c) are paid on a piecework basis.
  • Recordkeeping: Under the Act, employers must maintain records for a period of five years, documenting hours worked and earned sick leave taken by employees. The Proposed Rules expand on this obligation by noting that employers also must maintain records of earned sick leave accrued or advanced, paid, and cashed out or carried over at year-end.
    • Exempt Employees: The Proposed Rules also clarify that the employer is not required to maintain records documenting an employee’s hours worked if (1) she is exempt under the Fair Labor Standards Act or state wage and hour law and (2) the employer presumes that the employee works 40 hours per week for the purpose of calculating PSL accrual.
  • Independent Contractor Status: The Proposed Rules state that determining whether an individual is an independent contractor or employee for purposes of the Act will be based on the “ABC test,” as identified in the state’s Unemployment Compensation Law.

Although the Proposed Rules contain some potentially significant updates on the Act, New Jersey employers should keep in mind that these rules are only preliminary and are subject to change over the next several months based on public hearings and comments, and final rulemaking. We will continue to update you on forthcoming New Jersey PSL developments.

With the paid sick leave landscape continuing to expand and grow in complexity, companies should reach out to their Seyfarth contact for solutions and recommendations on addressing compliance with this law and sick leave requirements generally.