Seyfarth Synopsis: Yesterday, the New Jersey Senate joined the state Assembly in passing a bill that would impose statewide paid sick leave obligations on private employers and, notably, preempt all current and future municipal paid sick leave ordinances. The final step before New Jersey becomes the tenth state with a statewide sick leave mandate is for Governor Phil Murphy to sign the bill. He is expected to do so in the coming days. Once signed, Garden State employers will have 180 days until the paid sick leave requirements begin.

After years of frequent paid sick leave symptoms, including passing 13 municipal paid sick leave ordinances and often exploring the possibility of a statewide paid sick leave standard, New Jersey is on the verge of finally catching the nation’s paid sick leave bug and becoming the latest state to enact a statewide paid sick leave law. The updated prognosis follows yesterday’s successful New Jersey Senate vote on Bill A1827 (the “Bill” or the “PSL Law”)—a statewide sick leave mandate that would require employers to provide employees in New Jersey with paid sick leave. The Senate vote followed the example set by the New Jersey Assembly, which voted on and passed the Bill last month.

The Bill now awaits Governor Phil Murphy’s signature. Unlike his predecessor, New Jersey employers should not expect that Governor Murphy will cure their looming sick leave woes as he is expected to sign the Bill in the near future. Once the Bill is signed, the Garden State will officially be home to the country’s tenth paid sick leave law.[1]

The Bill will take effect on the 180th day following its enactment. Assuming it is signed by Governor Murphy before the end of the month, New Jersey employers’ paid sick leave obligations will begin sometime in mid to late-October 2018.

Notably, and after some potential uncertainty due to a related, but not identical Senate sick leave bill, the new state PSL Law will preempt all existing and future municipal sick leave ordinances. In other words, when the PSL Law goes into effect later this year, it will preempt the state’s 13 existing municipal paid sick leave ordinances.[2] Thus, while the introduction of a new statewide PSL Law will impose sick leave burdens on numerous businesses previously immune to such standards, a silver lining for employers with operations in any of the 13 New Jersey sick leave municipalities is that they have avoided a potential sick leave patchwork.

Here are some highlights of the New Jersey PSL Law:

  • Employee Eligibility: “Employee” is defined broadly and means “any individual engaged in service to an employer in the business of the employer for compensation.” The PSL Law excludes certain employees in the construction industry who are under a collective bargaining agreement, certain per diem health care employees, and certain public employees.
  • Covered Employer: “Employer” is also broadly defined and includes persons or entities that employ employees in New Jersey.
  • Accrual, Usage and Carryover:
    • Start of Accrual: The PSL Law states that sick leave accrual will start on the later of the law’s effective date or the date the employee’s employment begins.
    • Usage Waiting Period: Employees are entitled to begin using paid sick leave on the 120th calendar day after the start of their employment. This means that existing employees who have been employed for at least 120 calendar days at the time the PSL Law goes into effect will be entitled to use paid sick leave as it accrues.
    • Accrual Rate and Cap: All employees working for an employer in New Jersey are entitled to accrue one hour of sick leave for every 30 hours worked, up to 40 hours per year.
    • Usage and Carryover Caps: An employer is not required to permit employees to use more than 40 hours of paid sick leave in any benefit year or carry over more than 40 hours of unused sick leave at year-end.
  • Frontloading: While an employer may frontload an employee with the full amount of earned sick leave on the first day of each benefit year to avoid the accrual process, it does not appear that the PSL Law allows employers with a frontloading system to adopt a “use it or lose it” approach for unused sick leave at the end of the year. The PSL Law states that if the employer chooses to frontload the required amount of sick leave at the start of each year, it must either (1) pay the employee for the full amount of unused earned sick leave in the final month of the benefit year; or (2) permit the employee to carry over unused sick leave to the next benefit year.
  • Payout at Year-End: Employers can, but are not required to, offer employees a payment of unused earned sick leave in the final month of the employer’s benefit year. The employee then has 10 calendar days from the date of the offer to either (1) accept the payment in full, (2) accept the payment for 50 percent of the amount of unused earned sick leave, or (3) decline the payment. If the employee chooses options (2) or (3), up to 40 hours of unused, unpaid earned sick leave will carry over to the next benefit year.
  • Reasons for Use: An employee must be permitted to use earned sick leave for any of the following reasons:
    • For diagnosis, care, or treatment of, or recovery from, an employee’s mental or physical illness, injury or other adverse health condition or for preventive medical care for the employee;
    • For the employee to aid or care for a covered family member during diagnosis, care, or treatment of, or recovery from, the family member’s mental or physical illness, injury or adverse health condition, or during preventive medical care for the family member;
    • Certain absences resulting from the employee or a covered family member’s status as a victim of domestic or sexual violence;
    • Closures of the employee’s workplace, or the school or place of care of a child of the employee, by order of a public official due to an epidemic or other public health emergency, or because of the issuance by a public health authority of a determination that the presence in the community of the employee, or a member of the employee’s family member in need of care by the employee, would jeopardize the health of others;
    • For time needed by the employee to attend his/her child’s school-related conference, meeting, function, or other event requested or required by a school administrator, teacher, or other professional staff member responsible for the child’s education, or to attend a meeting regarding care provided to the child in connection with the child’s health conditions or disability.
  • Family Member: Covered family member includes: (1) child; (2) grandchild; (3) sibling; (4) spouse; (5) domestic partner; (6) civil union partner; (7) parent; (8) grandparent; (9) spouse, domestic partner, or civil union partner of a parent or grandparent of the employee; (10) a sibling of a spouse, domestic partner, or civil union partner of the employee; or (11) any other individual related by blood to the employee or whose close association with the employee is the equivalent of a family relationship. A number of these terms have definitions under the PSL Law.
  • Use of PTO: The PSL Law states that employers can use non-sick paid leave programs (i.e., PTO, vacation, etc.) for compliance if the leave is fully paid, accrues at a sufficient rate, and can be used for the same purposes set forth under the law and “in the manner provided” by the law.
  • Payment of Sick Leave: Employers will be required to pay an employee for earned sick time at the same rate of pay and with the same benefits as the employee normally earns, except such payment must not be less than the minimum wage.
  • Increments of Use: Unlike many existing paid sick leave laws and ordinances, the PSL Law states than an employer may choose the increments in which its employees must use paid sick leave, limited only by the number of hours the employee would have worked. In other words, the increment of use cannot exceed the number of hours the employee was scheduled to work and would have worked had he/she not used sick leave.
  • Notice to Employer:
    • Foreseeable Absences: For foreseeable sick leave absences (i.e., a scheduled doctor’s appointment), employers may require employees to provide advance notice of their intention to use paid sick leave, up to seven days prior to the date the leave is expected to begin, and the expected duration of the leave. Employers can require employees to make a reasonable effort to schedule the use of earned sick leave in a manner that does not unduly disrupt the employer’s operations. Notably, the PSL Law also allows employers to prohibit employees from using earned sick leave for foreseeable absences on certain dates, and states that employers may require employees to provide reasonable documentation if they have an unforeseeable need for sick leave on those dates.
    • Unforeseeable Absences: For unforeseeable sick leave absences, employers can require that employees provide notice of their intention to use sick leave as soon as practicable. The PSL Law expressly states that employers that require notice for unforeseeable sick leave absences must notify employees of this requirement.
  • Documentation: Employers may require employees to submit reasonable documentation if they use paid sick leave for three or more consecutive days, or, as noted above, if the employee uses sick leave for an unforeseeable absence on certain dates that the employer does not permit employees to take sick leave for foreseeable absences. The PSL Law provides examples of what is considered reasonable documentation based on the nature of the protected absence.
  • Collective Bargaining Agreements (CBA): The PSL Law states it does not apply to employees covered by a CBA in effect at the time the PSL law goes into effect until the CBA expires. The PSL law further notes that employees or employee representatives may waive the rights or benefits provided under the law during the negotiation of a CBA.
  • Retaliation: The PSL Law prohibits any retaliatory personnel action or discrimination against an employee because the employee requests or uses paid sick leave in accordance with the law or, and significantly, the employer’s own earned sick leave policy.
  • Notice and Posting: The PSL Law requires that employers provide notice to employees and display a poster of employees rights under the law. Specifically, employers must provide each employee with a written copy of the notice (1) not later than 30 days after the state issues the model notice, (2) at the time of the employee’s hiring, if he/she is hired after the model notice is issued, and (3) at any time when first requested by the employee.
  • Recordkeeping: Employers must maintain certain paid sick leave records for a period of at least five years.
  • Termination of Employment: Employers are not required to cash out any earned, unused paid sick leave upon separation of employment. However, if an employee is rehired by the employer within six months of separation, any accrued, unused paid sick leave must be reinstated to the employee.

Employers should take steps now to comply with the requirements of PSL Law before the law’s expected mid-October 2018 effective date. Here are some steps to consider:

  • Review existing sick leave policies and either implement new policies or revise existing policies to satisfy the PSL Law.
  • Review policies on attendance, anti-retaliation, conduct, and discipline for compliance with the PSL Law.
  • Monitor the New Jersey Department of Labor and Workforce Development website for information on the PSL Law, including a model poster/notice and proposed and final regulations.
  • Train supervisory and managerial employees, as well as HR, on the new requirements.

We will continue to monitor and provide updates on New Jersey paid sick leave developments as the effective date approaches and any changes that take place thereafter.