United States: Just In Time For Flu Season! More On Sick Pay

Employers navigating the treacherous waters of California's new Paid Sick Leave Law and its recent amendments recently received some welcome guidance from the Labor Commissioner. On the heels of an August 7, 2015 opinion letter, in October, the LC issued updated FAQs to assist employers comply with the new law.

While much of the information in the updated FAQs remains unchanged from the original FAQs issued in December 2014, the updated FAQs incorporate the changes from the recent statutory amendments, provide answers to some burning questions, and add more detailed information about the law. Here are highlights from the updated FAQs and the August 7, 2015 opinion letter:

Qualified Employees. The initial FAQs identified three categories of individuals who are exempt from the law. The updated FAQs identify one more—retired annuitants working for governmental entities.

Compliant Sick Pay Policies. While the initial FAQs addressed how much paid sick leave employees are entitled to under the new law, the updated FAQs expand on this point to discuss employers' different policy options (incorporating information from the recent amendments of course!).

Accrual Policy. As we all know by now, under an accrual policy, employees accrue sick leave at the rate of at least one hour for every 30 hours worked, up to a cap of 48 hours or six days. But employers can limit the amount of sick pay an employee can use each year. The updated FAQs and the August 7, 2015 opinion letter clarify that employers can limit the use of paid sick pay to 24 hours or three days, whichever is more for the employee. So if an employee regularly works 10-hour days and has accrued 30 hours of sick pay, the employee would be entitled to use all 30 hours; the employer could not limit the accrued sick pay to only 24 hours. Similarly, if an employer regularly works six-hour days and has accrued 24 hours, then the employee would be entitled to use all 24 hours.

The amendments allow employers to deviate from the original accrual method (one hour for every 30 hours worked) so long as employees accrue at least 24 hours of paid sick time by the 120th calendar day of employment.

No Accrual/Up Front Policy. Under a no accrual/up-front policy, the employer front loads the full amount of paid sick leave each year. The FAQs and the August 7, 2015 opinion letter answer the burning question of what constitutes the "full amount of paid sick leave": Twenty-four hours or three days, whichever is more for the employee. So if an employee regularly works 10-hour days, the employer must front-load 30 hours of paid sick leave at the beginning of the year (not 24). Similarly, if an employee regularly works six-hour days, then the employer must front-load 24 hours (not three days).

The amendments regarding the no-accrual method clarified that employers who use this front-loading method can grant the full amount of leave at the beginning of each calendar year, each year of employment, or any other 12-month period. The full amount of leave must be available for employees to use immediately. Paid sick leave need not be available to new hires until the 120th day of employment.

Grandfathered Policies. The amendments provide that certain policies can be "grandfathered" if the policy existed before January 1, 2015 and (1) the accrual provides no fewer than one day or 8 hours of accrued paid sick leave or paid time off within three months of employment per year and (2) the employee was eligible to earn at least three days or 24 hours of paid sick leave or paid time off within nine months of employment. But beware! An employer that modifies a grandfathered policy nullifies the grandfathered qualification, and the employer must then comply with either the accrual or no-accrual policies described above.

Of course, employers may also provide paid sick leave through existing PTO or sick pay policies, so long as the policy satisfies the accrual, carryover and use requirements of the new law and applies to all qualified employees.

Seasonal And Returning Employees. The updated FAQs discuss paid sick leave for seasonal/returning employees. The law requires that an employee's accrued and unused sick leave be restored if that employee returns to the same employer within 12 months from the previous separation. Employers need not restore sick leave to employees who return to work for the same employer after more than one year. The amendments have clarified that employers need not restore previously accrued paid sick leave provided under a PTO policy where the employee's PTO was cashed out at the end of employment.

Unlimited Time Off. The updated FAQs address the amendments regarding unlimited time off policies. The law requires that employers, on each payday, provide written notice to employees regarding the amount of paid sick leave they have available. The amendments have clarified that employers with unlimited paid time off plans can meet this requirement by indicating, on itemized pay stubs or on separate written statements. that the paid sick leave is "unlimited."

Pay for Sick Leave. The updated FAQs address both the original method for calculating sick pay and the new method added by the amendments. Initially, the only method for calculating sick pay was by dividing the total compensation for the previous 90 days (excluding overtime) by the total number of non-overtime hours worked in the full pay periods of the prior 90 days of employment. The amendments provided a new method for this calculation: the employee's regular, non-overtime rate of pay for the workweek in which the employee used sick leave. Exempt employees' rate of pay for sick leave is calculated in the same manner the employer calculates wages for other forms of paid leave time (e.g., vacation or PTO).

30-Day Eligibility Requirement. Before the updated FAQs, it was unclear whether employees were required to work in California for the same employer for at least 30 calendar days or work days to be eligible for paid sick leave. The updated FAQs clarify that this 30-day requirement is calendar days.

While the FAQs and the opinion letter do not address every potential question regarding the new law and amendments, they provide more guidance and clarification on the law. Stay tuned as we'll continue to keep you posted on any new paid sick leave developments.

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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