On Nov. 9, 2023, the Chicago City Council passed the new Chicago Paid Leave and Paid Sick and Safe Leave Ordinance, effective Dec. 31, 2023. The new ordinance substantially changes prior leave requirements for nearly all employers in the city of Chicago by the end of 2023 and is one of the most expansive paid time-off (PTO) laws in the country.
The New Chicago Paid Leave and Paid Sick and Safe Leave Ordinance
The new ordinance will replace Chicago’s Paid Sick Leave Ordinance currently in effect. It applies to any employer who employs at least one employee, with substantive obligations differing according to whether an employer is “small” (50 or fewer), “medium” (51-100 employees) or neither. Covered employees include those who perform at least two hours of work in a two-week period for an employer while physically present within the city of Chicago and domestic workers.
Accrual and Front-Loading
Beginning Jan. 1, 2024, or on their first day of employment, Chicago employees will be entitled to earn up to 40 hours of paid sick and safe leave and up to 40 hours of general paid leave, at a rate of one hour per every 35 hours worked and per 12-month period. An employee’s 12-month accrual period is measured from the date the employee begins to accrue leave, and both types of paid leave must accrue in hourly increments only. However, if an employer’s policy is more generous, the employer may credit the accrual time on a monthly basis. Employers may impose a 40-hour annual accrual cap for each type of leave, yet the ordinance does not provide that usage caps are permissible.
Employers also are permitted to front-load the full 40 hours of general paid leave and 40 hours of paid sick and safe leave to employees on the first day of their accrual period. Notably, while front-loading or an unlimited PTO policy relieves an employer of carryover obligations for general paid leave, paid sick and safe leave still must be carried over as discussed below.
Permitted Usage and Restrictions Thereon
As with the state of Illinois’ recently enacted Paid Leave for All Workers Act, employees’ 40 hours of general paid leave can be taken for any reason and employers cannot require a reason for the leave or documentation to support it. In contrast, paid sick and safe leave is available only when an employee or the employee’s family member is ill or injured, or for the purpose of receiving professional care, including preventive care, diagnosis or treatment for medical, mental or behavioral issues, including substance use disorders; an employee or the employee’s family member is ordered to quarantine; the employee is obeying a stay-home or isolation order related to communicable disease; the employee or the employee’s family member is a victim of domestic violence; or the employee’s workplace or the school or place of care of the family member for whom the employee has to care is closed due to a public health emergency.
The ordinance also provides that employees must be permitted to choose to use general paid leave or paid sick and safe leave prior to using any other leave provided by the employer or by city, state or federal law. It is unclear whether the city is attempting to allow stacking of leave time with this provision, or whether more generous existing leave policies that otherwise meet the ordinance’s requirements would satisfy.
Employers may, however:
- Prohibit employees from taking any accrued general paid leave until after their 90th day of employment and any accrued paid sick and safe leave until after their 30th day of employment.
- Require up to seven days’ notice and reasonable preapproval to maintain continuity of operations before an employee takes general paid leave, unless an employer has an unlimited PTO policy, in which case, they may not require preapproval.
- Require up to seven days’ notice of foreseeable sick and safe leave (e.g., prescheduled appointments or court dates) and notice as soon as practicable of unforeseeable sick and safe leave.
- After an employee is absent for more than three consecutive workdays, require certification that the employee used sick or safe leave for a permissible reason. Acceptable forms of certification include documentation signed by a licensed healthcare provider; a police report; a court document; a signed statement from an attorney, a member of the clergy or a victim services advocate; or any other evidence that supports the safe leave, including a written statement from the employee or any other person who has knowledge of the circumstances.
Carryover and Payout
Employees who accrue leave time must be permitted to carry over up to 16 hours of unused general paid leave and 80 hours of unused sick and safe leave into the following year. Any additional unused accrued leave generally need not be carried over or paid out at the end of the 12-month accrual period.
However, any unused general paid leave must be paid out upon separation or when an employee is transferred outside the city of Chicago, while unused sick and safe leave need not be paid out. There are three exceptions to this rule:
- Small employers are excused from this payout requirement entirely.
- Medium employers need only pay out 16 hours of unused paid leave at separation through Dec. 31, 2024, after which they too will need to pay out the full amount of any accrued but unused general paid leave at separation.
- Employers with unlimited PTO policies must pay the monetary equivalent of 40 hours of paid time off minus the hours used by the employee in the 12 months prior to separation; however, if the employee used more than 40 hours in the 12-month period prior to the employee’s separation, then the employer is not required to pay out any accrued but unused general paid-leave time under the new city ordinance.
Additionally, if an employer sells, transfers or otherwise assigns the employer’s business, and existing employees continue to work in Chicago, these employees must be permitted to carry over their general paid leave and paid sick and safe leave to the new employer.
Record Retention and Notice Requirements
Employers also must maintain — for the longer of five years, or the duration of any claim or investigation — records of each employee’s name, address, hours worked, pay rate, wage agreement, number of paid time-off hours earned each year, the dates on which paid time-off hours were taken and paid, and any other records necessary to demonstrate compliance. Failure to preserve these records will result in a rebuttable presumption of violation.
The ordinance also imposes a variety of notice obligations on employers, including:
- Providing a copy of the records discussed above to an employee upon request.
- Issuing a written policy explaining the rate of paid leave and paid sick and safe leave accrual.
- Posting a notice of employees’ rights under the ordinance, which the city plans to issue.
- Giving employees written notice of the paid time-off policy, including any notification requirements, at the onset of employment, within five calendar days before any change to the policy, and 14 days before any changes that affect right to final compensation for leave.
- Providing notice to any employees who have not been offered a work assignment for 60 days that they may request payout for accrued but unused paid-leave time.
- Providing information about leave accrual and usage each time an employee is paid.
- Providing written notice of employees’ rights under the ordinance with a first paycheck and annually with a paycheck issued within 30 days of July 1. The city also plans to issue a sample notice for this purpose.
Interaction With Existing Policies, Agreements and CBAs
If an employee accrued paid sick leave prior to Jan. 1, 2024, under an existing policy that does not meet the ordinance’s requirements, the employee is entitled to roll this sick time over to paid sick leave that complies with the new ordinance.
Employers who are covered by existing collective bargaining agreements (CBAs) are exempt from the ordinance’s requirements so long as there is an explicit waiver of rights included in the CBA. All other agreements may not waive the ordinance’s requirements.
Enforcement and Potential Exposure
Employers may not count paid leave or paid sick or safe leave absences as an attendance violation, reduce the employee’s or the employee’s family’s health coverage during a permitted leave, or otherwise interfere with or retaliate against employees for taking leave permitted by the ordinance.
Furthermore, the city may investigate any employer it learns has entered into two or more settlements in a year related to the ordinance. Employers found to be noncompliant with the new ordinance could face fines between $1,000 and $3,000 for each separate offense, with a reduced penalty of between $500 and $1,000 for each notice violation. Notably, each day that a violation continues constitutes a separate and distinct offense for which there will be a separate fine.
Employees also may bring a private cause of action. Violating employers will be liable for damages equal to three times the full amount of any leave denied or lost, interest calculated at the prevailing rate, costs and attorney’s fees. There will be a one-year delay (until Jan. 1, 2025) of enforcement through private right of actions related to general paid-leave requirements. However, actions related to paid sick and safe leave may commence Dec. 31, 2023.
Recommendations for Employers
Employers in the city of Chicago should immediately review their existing paid leave and paid sick leave policies to ensure they meet the new ordinance’s requirements. They also should ensure that payroll systems are prepared to identify paid time-off balances and review their rates of pay for calculating paid time off.