The California Department of Labor Standards Enforcement (“DLSE”) recently published additional FAQs relating to the California Paid Sick Leave law. These new FAQs address questions regarding:
- “Grandfathered” paid time off policies (or PTO plans in effect prior to January 1, 2015);
- Employee rates of pay, and
- The impact of state law on employer attendance policies.
With respect to “grandfathered” plans, the FAQs explains how a “grandfathered” plan complies with the paid sick leave law. This occurs when the “grandfathered” plan meets all of the accrual requirements set forth in the paid sick leave law, plus the following two criteria:
- The existing policy or plan made an amount of paid leave available that could be used for at least as many paid sick days as required under the new law, and
- The paid leave could be used under the same conditions as specified in the new law, or that had conditions more favorable to employees, (i.e., that provided more sick days than created under the new law, or that had a more favorable accrual rate, etc.)
If all of these criteria are met, then the employer is allowed to continue to use that existing paid time off plan in order to satisfy the paid sick leave requirements of the new law.
Rates of Pay
With respect to employee rates of pay, the FAQs clarify that under a grandfathered plan, the paid sick leave law does not change how employers compensate employees for paid time off under that time when time off is take for purposes other than California paid sick leave.
With respect to attendance policies, the FAQs clarify that employers are prohibited from disciplining employees for using accrued paid sick leave. Specifically, for employers who have an attendance “points” policy, employers cannot assess “points” against an employee for an absence that is covered under California law (including the California paid sick leave law
In addition, the FAQs address what happens when an employee has exhausted his/her California paid sick leave. If an employee does not have any accrued or available paid sick leave, (e.g., if the employee has already used all of his or her accrued and available paid sick leave under the employer’s policy, including as consistent with Labor Code section 233), and if the employee has an unscheduled absence that would otherwise violate the employer’s attendance policy, the paid sick leave law does not prohibit the employer from giving the employee an “occurrence” for such absence, even if the employee was actually sick and/or could have used paid sick leave for the absence if he or she had any such leave accrued.
The paid sick leave law does not “protect” all time off taken by an employee for illness or related purposes; it “protects” only an employee’s accrued and available paid sick leave as specified in the statute.
Take home for employers
It is recommended that all California employers review the updated FAQs and verify that their policies and practices comply with the new guidance.
On October 11, 2016, the California Department of Labor Standards Enforcement issued a new Opinion Letter interpreting California’s paid sick leave requirement. In this letter, the DLSE provided guidance on how to calculate paid sick leave for employees who are paid by commissions and for exempt employees who are given an annual, non-discretionary bonus.
Under the California paid sick leave law, there are 3 methods an employer can use to calculate paid sick time:
- Calculate paid sick time for nonexempt employees in the same manner as the “regular rate of pay” for the workweek in which the employee uses paid sick time, regardless of whether the employee actually works overtime in that workweek (Labor Code sec. 246(k)(1));
- Calculate paid sick time for nonexempt employees by “dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment” (Labor Code sec. 246(k)(2)); or
- Calculate paid sick time for exempt employees in the same manner as wages are calculated for other forms of paid leave time (Labor Code sec. 246(k)(3)).
According to the DLSE opinion letter, when calculating paid sick time for an employee who is paid on a commission basis, the employee must be paid according to options (1) or (2) above – even if the employee is exempt under the inside sales or outside sales exemption. The third option applies only to employees exempt under the professional, executive or administrative exemptions and not to a commissioned employee.
With respect to calculating paid sick leave time for exempt employees, the letter states that the non-discretionary bonus is not factored into the payment of paid sick leave. Instead, the employee “would be paid for an amount of pay which equals his or her regular salary for the sick day.”
While DLSE Opinion letters are not legally binding, they do provide employers with guidance on how the DLSE will interpret the issue in an administrative setting. Therefore, it is important for employers to review their practices and verify that they are in compliance with those outlined in this opinion letter.
Since the passage of the Healthy Workplaces, Healthy Families Act of 2014 (AB-1522), California employers have been seeking guidance and clarification on how to comply with the new law, which fully went into effect on July 1, 2015. Under this law, California employers are required to provide its employees with “not less than 24 hours or 3 days of paid sick leave” and may choose between granting sick leave “up front” or having employees accrue sick leave over the course of a year.
Recently, the Division of Labor Standards Enforcement (“DLSE”) was asked how many hours of paid sick leave are required to be granted “up front” for an employee who is scheduled to work a 10-hour workday – 24 hours or 30 hours. The DLSE’s answer may be surprising …
With respect to the employee who regularly works an extended work day (e.g. a 10-hour work day as opposed to the standard 8-hour day), the DLSE opined that a “day” of paid sick leave was equal to the employee’s normal workday – in this case 10 hours per day or 30 hours total. Therefore, the employer would be required to “frontload” three 10-hour days of sick leave in order to be compliant with the statute – otherwise the employee would receive less than the minimum of three days of paid sick leave required under the statute.
The DLSE also addressed the “frontloading” requirements for employees whose regular work day is less than 8-hours (i.e. a part-time employee). The DLSE opined that for a part time employee, the employer would be required to “frontload” 24 hours of sick leave in order to be compliant with the statute – otherwise the employee would receive less than the minimum of 24 hours of paid sick leave required under the statute.
The DLSE further stated that the same standard applies when the employer decides to use the accrual system and chooses to limit an employee’s use of accrued paid sick days to 24 hours or 3 days in a year. Under that system, an employee’s use of accrued sick leave cannot be limited to only 24 hours of sick leave if the employee’s regularly works an extended work day. Instead, the employee is entitled to take a minimum of 3 days of paid sick leave and the length of 1 day of sick leave would be equal to the employee’s normal workday. Similarly, when an employee has regular work hours of less than eight hours per day (e.g., four or six hours per day), the employer may not limit the employee’s use of accrued sick leave to only “three days.” Instead, the employee is entitled to take a minimum of 24 hours of paid sick leave.
The DLSE Opinion Letter is available here.
This week California Governor Jerry Brown signed AB 304 into law, which amended the Healthy Workplaces, Healthy Families Act of 2014 (i.e. California’s paid sick leave law). The amendments are effective immediately.
New definition of “covered employee”
- Employees are eligible for paid sick leave if they have worked for the same employer for 30 or more days within one year.
New options for providing the leave
- An employer does not have to follow the statutory accrual method of one hour per every 30 hours worked provided that the accrual is on a regular basis so that an employee has no less than three days or 24 hours of accrued sick leave or paid time off (PTO) by the 120th calendar day of employment or each calendar year or in each 12-month period. The employer can determine the accrual method so long as it meets the above requirements (Labor Code sec. 246(b)(3)).
- For new hires, a different option is available under the statute. Labor Code section 246(b)(4) states that “an employer may satisfy the accrual requirements … by providing not less than 24 hours or three days of paid sick leave that is available to the employee to use by the completion of his or her 120th calendar day of employment.” This option applies only to paid sick leave; not to PTO (Labor Code sec. 246(b)(4).
- A Pre-Existing Employer Policy (Policy in Effect Prior to January 1, 2015): If your organization already had a paid sick leave or paid time off policy in place prior to January 1, 2015, you have the flexibility to use your existing accrual method and not provide an additional three days/24 hours of paid sick leave or PTO as long as your preexisting policy accrues on a regular basis and meets both of the following requirements: “Employees have no less than one day or eight hours of accrued sick leave or paid time off within three months of employment, each calendar year, or each 12-month period” and “Employees were eligible to earn at least three days or 24 hours of sick leave or paid time off within nine months of employment.” (Labor Code sec. 246(e))
- Carrying over sick leave: While the amendment does not change that paid sick days carry over from year to year, it does clarify that an employer is permitted to limit an employee’s use of accrued paid sick leave to 3 days (or 24 hours) per year.
- Calculating paid sick time for non-exempt employees: The amendments clarify that the employer can calculate paid sick time in one of two ways – (1) in the same manner that the regular rate of pay for the workweek in which the employee uses paid sick time was calculated or (2) by dividing the employee’s total wages (excluding overtime) by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.
- Calculating paid sick time for exempt employees: The amendments clarify that the employer are to use the same rate used for other forms of paid leave.
- Rehires: The amendment clarifies that if an employee is paid out his/her accrued sick leave upon separation from employment, if the employee is rehired within a year, the employer is not required to reinstate accrued sick leave. However, if accrued paid sick leave was not paid out to the employee upon separation from employment, accrued, unused paid sick leave must be reinstated if the employee is rehired within one year.
- Recordkeeping: While employers must keep records of the hours worked, sick leave accrued, and sick leave used for each employee, the amendment clarifies that employers are not required to document the purpose for which paid sick leave was used.
- Review the changes with internal HR or payroll providers to select the preferred method of calculating pay for paid sick time, and ensure that the accrual method meets the minimum requirement of 24 hours/three days accrued over 120 days.
- If you provide unlimited paid sick time or PTO, consider updating your notices to employees to account for “unlimited” available time.
- Because paid sick time for exempt employees may be calculated in the same manner as an employer calculates wages for other forms of paid leave time (such as PTO or vacation), review and assure that your policies and practices regarding these calculations, payments, and entitlements are clear and compliant.