California Mandates Paid Sick Leave Effective July 1, 2015

The Governor signed AB 1522 into law on August 30, 2014, stating: “Tonight, the Legislature took historic action to help hardworking Californians. This bill guarantees that millions of workers – from Eureka to San Diego – won’t lose their jobs or pay just because they get sick.”

In the author’s experience, there aren’t many businesses that terminate hardworking employees “just because they get sick.” That doesn’t make sense as hardworking employees are valuable to businesses. It’s the flakes who always miss work who get the axe.

And paying employees for missing work only incentivizes abuse. Ask any small/medium business owner what happens if they don’t work. Uh, they don’t get paid. But now their employees do.

So Much For Free Enterprise

Up to this point, California employers could elect to provide paid time off (other than for organ or bone marrow transplant donors) whether for sick leave or personal leave like vacation. Many employers have elected to combine both sick and vacation into a single policy called “paid time off” (PTO). Other employers, especially small/medium sized ones, are hard pressed to provide paid sick, vacation or PTO, and therefore have not provided such “benefits.”

Effective July 1, 2015, the sunny state of California has mandated that all California employers, including small and medium businesses, provide paid sick leave to their employees. This heretofore elective “benefit” is now required by the the state of California under AB 1522.

Basics Of The Paid Sick Leave Law

All employers, even those with one employee, must provide paid sick leave. The current employee entitlement is 24 hours or 3 days per year.

Employees are allowed to accrue paid sick leave at the rate of 1 hour of paid leave for every 30 hours worked. Employees must be allowed to accrue up to 48 hours or 6 days of paid sick leave per year. Any unused paid sick leave must be carried over from year to year.

Unlike paid vacation and PTO, employers are not required to pay out accrued and unused sick leave on termination of employment. But if an employee separates from employment and employer rehires that employee, employer must reinstate the amount of accrued unused paid sick leave the employee had on the books on separation, up to a maximum of 48 hours or 6 days.

Employees are eligible to use paid sick leave after completion of 90 days of employment. They may use paid sick leave not only for their own illness but to care for an immediate family member including, spouse, domestic partner, child, parent, parent-in-law, grand parent, and grandchild. Included within the definition of child or parent are legal relationships of adopted, foster, stepchild, ward, and loco parentis.

Employers may set a reasonable minimum increment for paid sick leave use but that minimum increment cannot exceed two hours.

Employers must provide notice of paid sick leave as follows: 1) by posting a notice of the accrual rate, terms of use, and non-retaliation provisions in their workplace, 2) by providing an updated LC 2810.5 notice (the DLSE has been directed to update same), and 3) by providing the amount of accrued and available paid sick leave on the employee’s itemized statement (LC 226) or in a separate writing each pay day with the employee’s pay.

No Retaliation

An employer may not retaliate against an employee who requests to use or who uses paid sick leave.

For Employers With No Paid Sick, Vacation, Or PTO Policy

The answer is easy but unfortunate: you must start providing paid sick leave as of July 1, 2015.

For Employers With PTO Policies

The new law includes provisions that attempt to reconcile existing PTO policies (which of course combine paid vacation and paid sick leave) with the new paid sick leave requirements. The provisions, however, are ambiguous and appear to contradict California PTO common law.

AB 1522 says:

An employer is not required to provide additional paid sick days pursuant to this section if the employer has a paid leave policy or paid time off policy, the employer makes available an amount of leave that may be used for the same purposes and under the same conditions as specified in this section, and the policy does either of the following: (1) Satisfies the accrual, carry over, and use requirements of this section. (2) Provides no less than 24 hours or three days of paid sick leave, or equivalent paid leave or paid time off, for employee use for each year of employment or calendar year or 12-month basis.

On the face of it, this appears to be a good thing for employers with PTO policies, so long as the PTO accrual provided is at least 24 hours or 3 days per year.

However, the concept also appears to be that at least 24 hours or 3 days per year must be earmarked for “sick leave.” In order to ensure the AB 1522 requirements are met, employers must ensure at least 24 hours or 3 days are available to the employee for “sick leave” as opposed to other leave, like personal time off, vacation, or other non-sick leave purposes. The consequence of failing to differentiate sick leave would be an increased PTO entitlement the employer never intended.

For example, let’s say your PTO policy allows accrual of 10 PTO days per year. Prior to AB 1522 an employee could use all 10 days for personal time, vacation, or other non-sick leave time off. As of July 1, 2015, 24 hours or 3 days must be made available for paid sick leave. If you were to allow an employee to use all 10 PTO days for non-sick leave and the employee then got sick (or had to care for an ill family member) then the law would require you to provide an additional 24 hours or 3 days paid sick leave in the author’s view. Rather than 10 PTO days maximum under your PTO policy, you would end up having to provide 13 PTO days in that scenario.

Also note the administrative burden: the point of a PTO policy is to lump all paid time off into one bucket so as to eliminate the burden of tracking precise reasons for PTO use. Now it appears employers with PTO plans must account for “sick leave” PTO use versus non-sick leave PTO use. How else to comply with AB 1522?

Further, employers must report available “paid sick leave” or “paid time off leave an employer provides in lieu of sick leave” on the employee’s pay stub (or other writing delivered with their pay) or face LC 226 penalties for “inaccurate itemized statements.”

Finally, how is the AB 1522 paid sick leave accrual rate (one hour per 30 hours worked) to be reconciled with  PTO policies that have a different accrual rate for PTO? Likewise, how does it work for PTO policies that have a different accrual cap from the AB 1522 accrual cap for paid sick leave (48 hours or 6 days)?  The answers are not readily apparent. This means either administrative guidance or court decisions must fill the gap.  This in turn means litigation; obviously not good for California employers.

Thus, your PTO policy, procedures, and accounting may have to be revamped to ensure compliance with the law while avoiding unintended consequences. Or, alternatively, it may be simpler and cleaner to revert back to the old fashioned separate paid vacation and sick leave policies.