United States: Urgency Legislation Clarifies California's New Paid Sick Leave Law

As discussed in our prior article, the recently enacted Healthy Workplaces, Healthy Families Act of 2014 requires employers to provide paid sick leave to California employees who work in California for 30 or more days within a year from the commencement of employment. This new law, which took effect July 1, 2015, affects all employers, regardless of size, who have employees working in California.

Yet, as employers began to grapple with complying with the new law, many questions arose regarding its interpretation. On July 13, 2015, California Governor Jerry Brown signed into law “urgency” legislation (AB 304), effective immediately, which helps clarify California’s paid sick leave requirements. Below is a summary of the new amendments.

Covered Employees

Where California’s paid sick leave law was previously ambiguous, AB 304 expressly excludes public entity retired annuitants from the definition of covered “employee.”  Additionally, the bill clarifies that the 30-day eligibility period for covered employees applies to time worked “with the same employer.”

Flexible Accrual Rate

AB 304 authorizes employers to provide for employee sick leave accrual on a basis other than one hour for each 30 hours worked (as previously required). However, accrual must be on a regular basis, and the employee must have 24 hours of accrued sick leave available by the 120th calendar day of employment (or each calendar year or 12-month period).

Limitations on Use of Paid Sick Leave

The original law permitted employers to limit an employee’s use of paid sick days to 24 hours or three days in each year of employment. AB 304 now permits employers to limit an employee’s use of paid sick days to 24 hours or three days in each year of employment, calendar year or 12-month period.  AB 304 also confirms that no accrual or carry-over of accrued paid sick days is required if employers provide 24 hours or three days of paid sick leave at the beginning of each year of employment, calendar year or 12-month period.

Pre-Existing Paid Leave Policies

AB 304 provides that an employer is not required to provide additional paid sick days if the employer has an existing policy that provides paid leave for the same purposes and under the same conditions, so long as the policy:

  • satisfies the accrual, carry-over and use requirements of the California paid sick leave law; or
  • provided paid sick leave or paid time off to a class of employees before January 1, 2015, using an accrual method different than providing one hour per 30 hours worked, so long as the accrual is on a regular basis so that an employee (current or new): (a) has no less than one day or eight hours of accrued sick leave or paid time off within three months of employment of each calendar year or 12-month period, and (b) was eligible to earn at least 24 hours or three days of sick leave or paid time off within nine months of employment. However, any modifications to a pre-January 1, 2015 policy that lowers the accrual rate will lose its grandfathered status and subject the employer to the law’s accrual requirements going forward.

Employees Rehired Within One Year of Separation From Employment

The new amendments clarify that an employer is not required to reinstate accrued paid time off to an employee rehired within one year of separation from employment if the accrued paid time off was cashed out at the time of termination, resignation or separation.

Notice Requirement

California’s paid sick leave law requires employers to provide an employee with written notice of the amount of paid sick leave available (or paid time off provided in lieu of sick leave). AB 304 permits employers who provide unlimited sick leave to their employees to satisfy notice requirements by indicating “unlimited” on employees’ itemized wage statements.

Pay Rate 

For non-exempt (i.e., overtime-eligible) employees, AB 304 requires that employers calculate paid sick leave in one of two ways:

  1. In the same manner as the employee’s regular rate of pay for the workweek in which the employee uses paid sick time; or
  2. By dividing an employee’s total wages, not including overtime premium pay, by the total hours worked in the full pay periods of the prior 90 days of employment.

For exempt (i.e., not overtime-eligible) employees, paid sick leave should be calculated in the same manner as the employer calculates wages for other forms of paid leave time.

Record Keeping

Existing California law requires an employer to keep records for three years documenting the hours worked and paid sick days accrued and used by an employee, and to make those records available to the Labor Commissioner upon request. AB 304 clarifies that an employer has no obligation to inquire into or record the purposes for which an employee uses sick leave or paid time off.

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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