United States: Final Regulations Clarify And Expand Portland Sick Leave Law Requirements

Beginning January 1, 2014, private-sector employers doing business in Portland that have six or more employees will be required to provide employees with a minimum of one hour of paid sick leave for every 30 hours of work performed by the employee. Employers doing business in Portland that have five or fewer employees will be required to provide unpaid sick leave for every 30 hours of work performed by the employee.

The paid sick leave ordinance, unanimously passed by the Portland City Council in March 2013,1 directed the City Attorney to draft rules and procedures to implement the law.  Regulations proposed by the City Attorney have now been adopted.  In many instances the regulatory requirements mirror those contained in the ordinance.  However, there are also regulations that clarify and expand ordinance requirements.  Below we summarize the ordinance and the new regulations.

Covered Employees

A covered employee is an individual who works at least 240 hours in a calendar year in Portland and who is either an employee under state wage payment or minimum wage and overtime laws, an individual working as a condition of receiving public assistance, or a home care worker, as defined by state law.  The regulations clarify that eligible employees may use accrued sick time on the 90th calendar day after employment began, if they have worked at least 240 hours for the employer. 

Employment Situations

Generally, an employee who performs work in Portland is covered.  Notably, employees who travel to Portland and make a stop as a purpose of conducting their work (e.g., to make pickups, deliveries, or sales calls) are covered for all hours worked in Portland.  Employees who perform work for an employer by physically working in Portland via telecommuting are covered for hours that they telecommute in Portland.  Temporary workers are covered if they perform work in Portland.  However, temporary workers supplied by a staffing agency or similar entity are considered the agency's employees for purposes of the ordinance.

Employees who perform work outside Portland, even if the employer is Portland-based, are not covered for hours worked outside Portland.  Additionally, employees who travel through Portland but do not stop in the city as a purpose of their work are not covered for the time spent traveling through Portland.  Employees who travel through Portland and only make incidental stops (e.g. purchasing gas, eating a meal, or changing a flat tire) are not considered to be making a stop as a purpose of their work.

Accrual of Sick Time

Employees begin accruing sick time when the law takes effect on January 1, 2014.  For businesses that exist when the law takes effect, the regulations clarify that accrual begins regardless of whether an employee has worked 240 hours.  Regardless of whether an employee accrues unpaid or paid sick time, the accrual rate under the ordinance is the same – one hour for every 30 hours worked.  The regulations provide that not only are an employee's regular work hours counted for accrual purposes, overtime hours are included in hours worked for employees covered by the federal Fair Labor Standards Act (FLSA) and/or state wage and hour law.

Paid or Unpaid Leave Depends on the Number of Employees

As noted above, some employees may be entitled to unpaid sick time, while others accrue paid sick time.  This depends on how many employees an employer has: if six or more, an employee accrues paid sick time; if less than six, unpaid sick time.  The regulations clarify how employee numbers are determined.  All employees who work for an employer are counted, including full-time, temporary and part-time employees, and employees who work outside Portland or outside Oregon. 

For businesses existing when the ordinance takes effect, the regulations indicate that the number of employees is calculated quarterly and determined by the number of employees on the first day of each quarter; quarterly dates are January 1, April 1, July 1, and October 1.  The quarterly numbers are particularly important for small employers with fluctuating workforce levels.2

Per the regulations, even if employee numbers fall below six, an employee must be allowed to use accrued but unused paid sick time.3

When an employee accrues two different types of sick time (paid and unpaid), he or she must use the sick time in the order it was accrued.4

Caps on Accrual and Use of Sick Time

The ordinance allows employees to accrue a maximum of 40 hours sick time in a calendar year, unless an employer provides or is contractually obligated to provide additional sick time.  According to the regulations, employees may accrue up to 40 hours of sick time in a calendar year, regardless of how many accrued but unused sick time hours are carried over from the previous calendar year.  However, the regulations also clarify that an employee can only use 40 hours of sick time in a calendar year.  This 40-hour limit applies regardless of how many accrued but unused sick time hours are carried over from the previous year.  For example, an employee that carries over 40 hours from one calendar year to the next may only use 40 hours of sick time in the new calendar year.

Cash Value of Sick Time

One provision that puzzled employers concerned the cash value of sick time, i.e., at what rate must an employee be paid (assuming paid sick time is accrued) when sick time is used.  The ordinance provides that sick time is calculated at the employee's hourly rate and with the same benefits, including healthcare benefits, the employee normally earns during hours worked and provided by an employer.  The regulations clarify that sick time hours for hourly employees are paid at the employee's regular hourly wage, and that employers are not required to pay employees at an overtime rate when an employee uses sick time for hours that would have been overtime hours if worked.  Moreover, the regulations provide that sick time hours for exempt employees paid an annual salary are paid at an hourly rate, which is determined by dividing the employee's annual salary by 52, then again by the number of hours the employee normally works.

Employee Notice and Documentation

When sick time use is foreseeable employees must provide notice of the need to use sick time "as soon as practicable" in accordance with an employer's established policy or standard.  The regulations specify that an employee must provide a written request as early as possible in advance of the leave, or as otherwise provided in the employer's written policy.  Additionally, the regulations provide guidance concerning situations when leave is unforeseeable.  In these instances, an employee must provide notice before the start of his or her shift, or as soon as practicable.

An employee must make a "reasonable effort" to schedule sick time in a way that does not unduly disrupt employer operations.  Concerning what would "unduly disrupt employer operations," the regulations provide that an employee should make reasonable attempts not to schedule medical appointments during peak work hours, when work is time-sensitive, or when mandatory meetings are scheduled.

An employer may require reasonable documentation that leave was not used for a non-covered purpose if the absence is more than three consecutive days.  The regulations provide that "consecutive days" are full calendar days, but do not include scheduled days off. Accordingly, if an employee is scheduled to work Monday, Wednesday, and Friday, and all three days are taken off, an employee has used sick time for three consecutive days.

There are three types of documentation that may be considered "reasonable documentation" under the ordinance; one being an employee's signed personal statement which indicates leave was taken for a covered purpose.  The regulations state that a signed statement does not need to be notarized or in affidavit format.  However, if the statement is handwritten, it must be legible and clearly state the employee's identity and, if applicable, his or her relationship to the family member and general purpose why sick time is being used, e.g., notifying the employer of the need to care for a sick child.  (Note, however, that an employee does not need to indicate the nature of the child's illness).

If an employer requires documentation, it must pay the cost of verification by a healthcare provider5 if the provider is not covered by insurance or another benefit plan.  The regulations add that an employer cannot require an employee to obtain a second opinion to verify the use of sick time.

If an employer suspects sick leave abuse, including a pattern of abuse, the ordinance allows an employer to require documentation from a licensed healthcare provider verifying the need for leave, the cost of which may be borne by the employee.  The regulations state that indications of a pattern of abuse may exist, regardless of whether an employee used sick time for more than three consecutive days.  Under the regulations, if an employer requests verification of the need for leave because it suspects sick time abuse, the employee must pay the verification cost.  Finally, the regulations provide that if an employer determines an employee used sick time for an impermissible purpose, including a pattern of abuse, or that the employee's document concerning the need to take sick time was falsified or untrue, an employer's action against the employee for such acts is not considered a retaliatory personnel action.

Interplay with Other Laws

An employee's sick time use may run concurrently with other leave under federal or state law (e.g., Oregon Family Leave Act or the federal Family and Medical Leave Act).  Additionally, the regulations provide that an employee cannot use sick time while on any other paid leave, e.g., sick time cannot be used while receiving workers' compensation benefits.

Prohibitions

An employer may not condition the use of sick time on an employee finding a replacement worker, or requiring an employee to work an alternate shift.  The regulations further prohibit an employer from requiring an employee to take off a full shift as a condition to using sick time.  Additionally, the regulations provide that an employer cannot make sick time available only at the end of a pay period, or some other future point in time.

The sick leave law generally prohibits retaliation.  In addition to stating what is prohibited, the ordinance and regulations specify what is not considered a retaliatory personnel action.  The ordinance states that an adverse employment action based on sick leave use not covered by the sick leave law is not a retaliatory personnel action.  As an example, the regulations state that a disciplinary action for absences that exceed the amount of accrued leave is not an adverse employment action.

Notice, Posting, Recordkeeping & Penalties

Employers must provide and post notice of employees' rights under the law.  The regulations clarify that the notice must contain: notice of an employee's entitlement to sick time; the amount of sick time and terms of use under the ordinance; the prohibition against retaliation for requesting or using sick time; the right to file a complaint if sick time is unlawfully denied or if unlawful retaliation occurs.  Additionally, the regulations impose an additional notice requirement by mandating that employers provide written quarterly notification concerning the amount of accrued but unused sick time available to an employee.

Employers must keep records documenting hours worked and sick time accrued and used by employees for at least two years.  The regulations clarify and expand upon those requirements.  First, the documentation must show "actual" hours worked for each week and each pay period.  Additionally, the records must also contain the employee's name, address, and occupation.  The regulations note that an employer with a compliant paid time-off policy is not required to keep records showing an employee's reasons for sick time use.

Noncompliant employers may be subject to a civil fine for violations.  The regulations provide that an employer who violates the notice requirements may be fined up to $125 for an initial violation and $250 for subsequent violations.  However, a fine up to $1,000 per violation may be assessed if the Bureau of Labor and Industries determines an employer engaged in a pattern of willful violations.

Recommendations

Before the ordinance takes effect, employers should consider the following:

  • Review and revise, if necessary, sick leave and/or PTO policies and procedures to ensure they meet the law's requirements. Additionally, ensure the policy and procedure for employees to notify an employee about accrued but unused sick time in writing.
  • Ensure timekeeping, payroll, and benefits systems properly calculate, track, and detail accrued and used sick time.  If using a third-party payroll processor, ensure the processor is aware of and complies with the requirements of the ordinance.  Also, ensure employees are provided quarterly updates concerning accrued and used sick time.
  • Monitor the Portland City Attorney's website6 for template notices, and monitor the Oregon Bureau of Labor and Industries' website7 for workplace posters.  Employers that want to develop their own notice should consult with knowledgeable employment counsel to ensure the notice satisfies all ordinance requirements.  Additionally, employers should consider creating acknowledgment forms to guard against claims that notice was not provided.
  • Train supervisory and managerial employees, as well as HR and payroll personnel, on the requirements of the ordinance and accompanying regulations.

Footnotes

1 Howard Rubin and Jennifer Nelson, Portland City Council Unanimously Passes Sick Leave Law, Littler ASAP (Mar. 21, 2013)

2 For example, an employer has five employees on January 1.  During the first quarter employees earn unpaid sick time.  On April 1, the employer has six employees.  During the second quarter employees earn paid sick time.

3 For example, an employee works for an employer with six employees and accrues but does not use eight hours of paid sick time in one quarter.  The following quarter the workforce drops to five employees.  The employee must be allowed to use the eight accrued but unused paid sick time hours.  The same rule applies with accrued but unused paid sick time that carries over from one calendar year to the next.

4 For example, an employee accrues 16 hours of unpaid sick time in quarter one.  The employee accrues eight hours of paid sick time in quarter two.  If the employee attempts to use accrued sick time in quarter three, the hours initially accrued (unpaid sick time) must be used until exhausted.

5 Normally employers would not experience difficulty determining who qualifies as a health care provider.  For the most part the regulations' definition of "health care provider" is what one would expect, e.g., physician, dentist, registered nurse.  However, the term also includes a person who is primarily responsible for the treatment of an eligible employee or family member solely through spiritual means, including but not limited to, a Christian Science practitioner.

http://www.portlandonline.com/attorney/index.cfm?c=28917

http://www.oregon.gov/boli/Pages/index.aspx

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Sebastian Chilco
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