AB1522 New Law July 1, 2015 Paid Sick Leave

What a Headache! California Enacts Paid Sick Leave (AB 1522)

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California is now the second state in the nation to implement paid sick-leave state wide (Connecticut is the other). Thankfully for employers, the Healthy Workplaces, Healthy Families Act of 2014 (“HWHF”) will not take effect until July 1, 2015, giving employers some time to plan ahead.

The HWHF is very broad in scope. It covers all employers regardless of size, with limited exceptions for union employees, construction employees, and providers of in-home support services. There is no small employer exception.

The union exception is limited to employees covered by collective bargaining agreements that expressly provide for: (1) wages, hours of work, and working conditions of employees; (2) paid sick days (with final and binding arbitration for disputes arising from sick days); (3) pay premium wages for all overtime hours worked; and (4) a regular hourly rate of not less than 30% more than the state minimum wage.

Like the San Francisco sick leave ordinance, the HWHF requires employers to accrue sick pay at a rate of “not less than one hour per every 30 hours worked.” The accrual begins on either the first day of work, or as of July 1, 2015 when the law becomes effective, whichever is later. For a full-time employee working 2080 hours per year (or a salaried employee), that would be 69.33 hours (8.66 days) per year.

Employees will be able to use that accrued sick time after 90 days of employment. Accrued sick leave can be limited to six days (48 hours) total, and an employer can limit carryover to three sick days (24 hours) each year.

Sick days can be used for the employee or a family member (defined as parent, child, spouse, registered domestic partner, grandparent, grandchild, or sibling). Time off can be used for illness or preventative care.

Employers with paid sick leave or paid time off policies do not need to change anything if their current policy:

  • Makes available an amount of leave that may be used for the same purposes as the new law (i.e. sick/family sick); and
  • Satisfies the accrual, carry over, and use requirements of HWHF; or
  • Provides for no less than 24 hours (3 days) of paid sick leave, or equivalent paid leave or paid time off per year.

Should California Employers Stop Providing PTO and Paid Vacation and Just Give Paid Sick Leave?

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Beginning on July 1, 2015, California employers will need to provide paid sick leave to pretty much all full-time, part-time, temporary and even on-call employees. As the year end approaches, many employers are revising their vacation, sick, and paid time off (PTO) policies to conform with California’s new requirements. If you haven’t mastered the nuances of California’s new paid sick leave laws, the DLSE’s FAQs provide a pretty good summary. But understanding the requirements is only the beginning. Figuring out how to amend existing policies is more complicated. Here’s why.

Many employers have combined sick and vacation leave into comprehensive PTO policies. Most employers provide PTO to make things simpler, and to prevent employees from having to misrepresent why they are taking time off.

However, adapting PTO policies to meet California’s particular sick leave requirements may result in providing benefits to a much broader group of employees than was originally intended. Providing PTO is more expensive than providing sick time, because PTO is considered wages that must be paid out upon separation from employment, while pure sick leave is not construed as wages and need not be paid out. Also many vacation/PTO policies are reserved for regular full-time employees, and do not apply to part-time, temporary or on-call workers. These differences are leading many employers to reverse the trend towards PTO and to go back to separate vacation and sick policies. That is certainly one option.

Another option is to do away with PTO or paid vacation all together. Many employers forget that there is no legal requirement to have paid vacation time. On the one hand, many employees like it, expect it, and may not choose to work for employers who don’t provide it. On the other hand, for many businesses, PTO/vacation simply isn’t necessary or even productive, because the employees who take vacation/PTO time off don’t bother to log it anyway. Many non-exempt employees simply take unpaid time off, and many exempt employees, tied to their electronic devices, work days they are supposed to be off and never actually use the accrued PTO/vacation time. Such employees wind up with the maximum accrual of vacation/PTO time that amounts to a sort of “bonus” upon separation of employment. Those payouts can be expensive for employers.

As you are considering your policies in light of California’s new sick leave requirements, think about whether your workforce really needs paid time off or vacation above and beyond what will soon be required sick leave. If not, it might be time to just provide sick leave, to allow employees to take other time off when business permits, and to judge employee productivity by accomplishments as opposed to days or hours worked.