Employer Alert: Emergency Amendments To California's Paid Sick Leave Law Go Into Effect Immediately

California's Health Workplace Health Families Act (paid sick leave law) went into effect on July 1, 2015. Less than two weeks later, Governor Brown signed into law emergency legislation to clarify some of the more ambiguous provisions. These changes went into effect immediately upon the Governor signing them (July 13th). We summarize the most significant changes below:

How is Sick Leave Earned?

Under the original law, employers had just two ways to comply with the new paid sick leave law: the "accrual method" or the "front-load" method.  Now they have a third, which is somewhat of a hybrid of the two.

Accrual Method. Under the accrual method, an employee must earn no less than 1 hour of paid sick leave for every 30 hours worked (which equates to 8.66 days per year or .0333 hours of paid sick leave for each hour worked). Despite this formula, the employer using the accrual method is permitted to impose a cap of just 48 hours on the amount of paid sick leave which accrues each year.  In addition, employers also may impose a 3 day (i.e., 24 hours) limit on the amount of paid sick leave an employee may use in any one year. One big disadvantage of using the accrual method is that employers must carefully track the accrual and report sick pay earnings and usage on the employee's pay stub.

Front Load Method. Under the front-loaded method, an employer front loads at least 24 hours of paid sick leave into the employee's account which may be used immediately. However, under all three methods, an employer may have a policy which prevents newly hired employees from using paid sick leave until completion of ninety (90) days of employment. One big advantage to this method is that the employer need not track and report sick pay accrual with each paycheck. However, usage still must be accounted for and reported on the pay stub.

New Hybrid Option. The new amendments provide employers with a new third option.  Under the third option, employers may have a policy where employees accrue at least 24 hours of paid sick leave (or paid time off), provided these paid days off accrue at a fast enough rate so that the employee earns at least 24 hours in 4 months (by the 120th calendar day of employment or within the first 120 days of any 12-month period for existing employees). Under this hybrid method, employers are still permitted to cap accrual at 48 hours, and limit usage to just 24 hours during any 12-month period. One big advantage to this method is that the employer need not track actual hours worked by the employee. Rather, the employer may track paid sick leave based on another method such as per week or per pay period. However, employers must still track the accrual and report sick pay earnings and usage on the employee's pay stub.

What if I had a time off policy in place as of January 1, 2015?

Under the new law, any employer who had a PTO or sick leave policy in place on January 1st need not offer additional paid sick leave on July 1st if the policy offered an accrual of at least one day of paid leave (or 8 hours) within three (3) months of employment (or within the first 3 months of the 12-month period, for existing employees) and the employee was eligible to accrue at least a total of three days (i.e., 24 hours) of paid sick leave (or PTO) within nine (9) months.  This method permits only "grandfathered" paid sick leave or PTO policies to continue in effect.

Calculating Paid Sick Leave?

The law requires the payment of sick leave at the employee's regular rate of pay. For most workers, this is not an issue.

But, where the employee also earns commissions or other monies in addition to the regular rate, that sum must be factored into the pay rate to determine the sick leave payment. For these employees, the amended law now offers two options:

• 90 Day Look Back Method. Divide the employee's total wages (not including overtime pay) by the  total hours worked in the full pay periods of the prior 90 days of employment before the sick leave is taken; or

• Regular Rate Method. This is the same method you would use to calculate the employee's regular rate for overtime purposes. Take the employee's total wages earned that week (including such things as commissions, service charges, bonuses, etc.) and divide that figure by the employee's total hours worked that week. Use this figure for the paid sick leave payment

Pay Stub Reporting Where The Employer Has An Unlimited PTO policy?

The law requires employers to report the amount of paid sick leave accrued or available on the employee's pay stub.  The original law was unclear as to how an employer may satisfy this requirement where the employer had an unlimited PTO policy. The amendments clarify that an employer may satisfy this requirement by stating on the pay stub that paid sick leave is "unlimited"

Reinstating Sick Leave Balances Of Former Employees Who Rejoin The Employer's Workforce?

The original law did not require employers to pay out sick leave upon termination. That hasn't changed.

However, it did (and still does) require an employer to reinstate accrued sick leave balances for employees who have been re-hired within one year of separation.  But, what happens where the returning employee was paid out the balance of their sick leave account at termination? The amendments clarify that in that situation, the employer is not required to reinstate anything.  

The amendments are welcome news in addressing some employer concerns, but still leave open a number of questions.  If you have not reviewed your sick leave policy with counsel, odds are there is a compliance concern.  If you need that assistance or if you have any questions about the contents of this article, please contact any member of the Firm. We can be reached at (818) 508-3700, or online at www.brgslaw.com.