On September 10, 2014, Governor Jerry Brown signed into law the Healthy Workplaces, Healthy Families Act of 2014, making California the second state to require its employers to provide paid sick leave to employees.  Under this new and complex law, which takes effect on July 1, 2015, most employers of employees who work in California for 30 or more days within a year from the start of their employment will be required to provide up to 24 hours or three days of paid sick leave per year to their employees.  Employers in Long Beach, San Diego and San Francisco, which already have their own sick leave laws, will find it challenging to comply with their multiple obligations.  The full text of the law can be found at http://www.leginfo.ca.gov/pub/13-14/bill/asm/ab_1501-1550/ab_1522_bill_20140904_enrolled.pdf

Who Are Covered Employers?

The law applies to most employers that have even one California employee who works 30 or more days in a year.  This includes part-time, temporary and seasonal employees who may not have been previously eligible for paid sick leave under an employer’s policies.

Which Employees are Excluded from Coverage?

The only exceptions to the obligation to provide these sick leave benefits are: 

  1. when employees are covered by a valid collective bargaining agreement that provides for paid sick leave and has other required provisions;
  2. when certain employees in the construction industry are covered by valid collective bargaining agreements;
  3. when employees are providers of certain in-home supportive services[1]; and
  4. when individuals are employed by an air carrier as a flight deck or cabin crew member and are covered by the federal Railway Labor Act, provided they receive compensated time off.

How Does Sick Leave Accrue?

Beginning on July 1, 2015, employees who work in California thirty or more days within a year from commencement of employment are entitled to paid sick days, to be accrued at a rate of no less than one hour for every 30 hours worked (inclusive of overtime); however, employees will not begin to accrue sick days until they have worked for 30 days from July 1, 2015 or from the commencement of hire, whichever is later.  Exempt employees are deemed to work the lesser of 40 hours per workweek or the hours that reflect their normal workweek.

Similar to California’s requirements for vacation accrual, employers must allow employees to carry over all accrued, unused sick days to the following year of employment.  However, employers may limit the use of paid sick leave to 24 hours, or three days, in each year of employment.  Employers may cap the accrual rate to a maximum bank of 48 hours, or six days, of paid sick time.  This six-day accrual limit appears intended to ensure the employee has full sick leave rights for both the instant year and the beginning of the next year.  Finally, employers have the option of avoiding calculating accrual and carry over by frontloading the amount of sick leave that can be used at the beginning of each year to 24 hours or three days. 

Employees who separate from employment need not be paid out accrued sick leave; however, if they are rehired by the same employer within one year, they must have their accrued but unused paid sick time bank reinstated and be allowed to immediately use the accrued sick days. 

Employers may determine how much sick leave employees need to use in order to invoke the paid leave provisions, but must set a reasonable minimum increment that may not exceed two hours. 

How is Sick Leave Compensated?

Sick leave is paid at the employee’s hourly wage.  For situations involving varying pay rates, such as different hourly pay, commission or piece rate compensation or for non-exempt salaried employees, the employer must divide the employee’s total wages (excluding overtime) by the employee’s total hours worked in the full pay periods for the prior 90 days of employment to determine the appropriate “hourly wage” for the employee’s paid sick leave.  Sick leave must be paid by the payday for the next regular payroll period after the sick leave was taken. 

When Can Sick Leave be Utilized?

Employees are entitled to use accrued paid sick days beginning on the 90th day of employment, after which they may use paid sick days as they are accrued.  Employers have discretion to lend paid sick days in advance of accrual.  Employers may not require employees to locate a replacement worker to cover the dates on which the employee uses paid sick days.

Employees are entitled to use paid sick time for preventative care for themselves or a family member, as well as for the diagnosis, care or treatment of their or their family member’s existing health condition.  For purposes of this law, “family member” is defined to mean a biological, adopted or foster child, stepchild, legal ward, or child to whom the child stands in loco parentis, regardless of the age or dependency status of the child, a biological, adoptive or foster parent, stepparent or legal guardian of an employee or the employee’s spouse or registered domestic partner, or a person who stood in loco parentis when the employee was a minor child.  “Family member” also includes a spouse, a registered domestic partner, a grandparent, a grandchild, or a sibling.  Employers must also permit employees to use paid sick days if they are victims of domestic violence, sexual assault or stalking. 

What Notice to Employers by Employees Does the Law Require?

Employees are expected to provide employers with “reasonable” advance notice if the need for paid sick leave is foreseeable.  Where it is unforeseeable, employees must provide notice as soon as practicable. 

What Posting and Record Retention Obligations Does the Employer Have?

On or before July 1, 2015, or at the time of hire, whichever is later, employers will be required to provide written information to the employee about the right to accrue and use paid sick leave, the right to be free from retaliation, and the right to file a complaint with the Labor Commissioner.  In furtherance of this, the Notice to Employees that is provided to all non-exempt employees at the time of hire pursuant to the law enacted in 2011 and known as the Wage Theft Prevention Act must, commencing in July of 2015, include language to satisfy this obligation.  The Labor Commissioner is charged with the responsibility to develop a new Wage Theft Prevention Act template that employers may use for this purpose. 

Employers will also be required to display in a conspicuous space in each workplace a poster notifying employees of their paid sick leave rights.  The Labor Commissioner is also responsible for preparing this poster.  Employers who willfully violate the posting requirement will be subject to a civil penalty of not more than $100 per offense. 

Employers will be required to provide employees with written information identifying the amount of paid sick leave they currently have available, or paid time off they currently have available if an employer provides paid time off in lieu of sick leave, on either the employee’s itemized wage statement pursuant to requirements of Labor Code Section 226, or in a separate writing provided on each designated pay date to accompany the employee’s payment of wages. 

Finally, employers will be required to retain, for at least three years, records documenting hours worked, paid sick days accrued, and paid sick days used by each employee.  The Labor Commissioner has the right to inspect these records.  If an employer fails to maintain adequate records, it will be presumed the employee is entitled to the maximum number of hours accruable under the new law unless the employer proves otherwise by clear and convincing evidence.

What are the Consequences of Retaliatory Actions by the Employer?

Employees may file discrimination or retaliation claims against their employers for any sick leave violation either with the Labor Commissioner or in a court of law.  There is a rebuttable presumption of unlawful retaliation if an employer takes an adverse employment action within 30 days of an employee filing a complaint with the Labor Commissioner alleging violation of the law, cooperating with an investigation or prosecution of an alleged violation of the law, or opposing a policy, practice or act that is prohibited by the law.

The Labor Commissioner may enforce violations of this new law by awarding reinstatement, back pay, and payment of sick days unlawfully withheld, plus the payment of an additional sum in the form of an administrative penalty, to an employee whose rights were violated.  Specifically, where paid sick leave is unlawfully withheld, the employee may recover the greater of the dollar value of the paid sick days withheld or $250 multiplied by three, not to exceed an aggregate penalty of $4,000.  If a paid sick leave-related violation results in other harm to the employee or person, the administrative penalty shall include a sum of $50 for each day that the violation occurred or continued, not to exceed $4,000. 

If an employer fails to comply with these provisions, the Labor Commissioner may take appropriate enforcement action to ensure compliance, including filing a civil action.  In such instances, the violating employer may be ordered to pay to the state $50 for each day a violation occurs or continues.

In order to encourage reporting of violations, employees or other persons may report specific violations to the Labor Commissioner and the Labor Commissioner may keep the reporting employee’s identifying information confidential. 

The Labor Commissioner or the Attorney General may also file a civil action in court on behalf of aggrieved employees against any employer or any person violating this law.  Damages include appropriate legal and equitable relief, such as reinstatement, back pay, the payment of sick days improperly withheld, and liquidated damages of $50 to each employee for each violation each day, plus reasonable attorneys’ fees and costs. 

Finally, employers are advised that this new law establishes “minimum” requirements for sick days and does not preempt, limit or otherwise affect the applicability of any other law or ordinance that provides greater accrual of use of paid sick days.  California employers must already consider slightly different variations in San Francisco, San Diego and Long Beach. 

What are our Recommendations to Employers?

  • Review and revise all paid sick leave and/or PTO policies and procedures to ensure they are compliant with the new law
  • Review and revise all offer letters and contracts with employees to ensure they are compliant with the new law
  • Establish sick leave policies in compliance with this new law if you haven’t offered this benefit previously
  • Monitor the Labor Commissioner’s website for updated template notices to employees and workplace posters
  • Ensure that timekeeping, payroll and benefits systems properly calculate, track and detail accrued and used sick time
  • Ensure that itemized wage statements include the amount of paid sick leave available to the employee
  • If a third party payroll processor is used, ensure that they are complying with the new law’s requirements
  • Train HR and managerial employees on requirements of the new law
  • Ensure compliance with local laws which may be applicable to your places of business to ensure that the greatest benefits are afforded to affected workers