California is now the second state in the country to pass a statewide paid sick leave law. The Healthy Workplaces, Healthy Families Act (the “Act”) requires nearly every employer in the state to provide its employees with one hour of paid leave for every 30 hours worked, up to 24 hours per year. The Act’s benefit entitlement provision takes effect July 1, 2015, although some provisions arguably take effect sooner.

Definitions

A qualifying employer is any person employing another, and it includes the state, political subdivisions of the state and municipalities. A qualifying employee is any employee who, on or after July 1, 2015, works in California for 30 or more days a year. Employees covered by a collective bargaining agreement that provides paid leave in excess of the Act’s requirements are not considered qualifying employees.

The Benefit

All qualifying employees of a qualifying employer must be permitted to accrue a minimum of one hour of paid leave for every 30 hours worked. Leave may be used for the diagnosis, care or treatment of an employee’s health condition or that of an employee’s family member. “Family member” is broadly defined and includes an employee’s child, sibling, parent, grandparent, spouse and registered domestic partner. Leave may also be used for reasons related to domestic violence, sexual assault or stalking.

Qualifying employees are eligible to use their accrued leave after 90 calendar days of employment or 90 days after the Act’s effective date (September 30, 2015), whichever is later. When employees take leave under the Act, they must be compensated at their regular rates of pay. Employers may cap employees’ use of paid sick leave at 24 hours each year. Employers may also cap employees’ accrued leave at 48 hours per year. All accrued but unused leave must carry over to the next year, unless the employer provides all 24 hours of leave to employees at the beginning of each year.

Upon termination, employers are not required to pay out accrued but unused leave, unless an employer uses a larger paid time off (PTO) policy to comply with the Act. If, within a year of an employee’s termination, the employee returns to work with the employer, all previously accrued leave must be reinstated and neither the 30-day employment period nor the 90-day waiting period must be satisfied.

Notice & Recordkeeping Requirements

Employers must provide new hires with individual notice of the Act, provide information to employees each time wages are paid and display an informational poster at their worksites. 

Upon Hire. The Act requires an employer to provide each new employee with a written notice containing several pieces of information, including that the employee (i) may accrue and use paid sick leave, (ii) may not be retaliated against for requesting or using such leave and (iii) has the right to file a complaint against an employer that does retaliate.

When Wages Are Paid. On each pay date, the Act requires an employer to provide each employee with a written notice that sets forth the amount of paid leave or PTO the employee has available for use. This information can either be provided on an employee’s itemized wage statement or in a separate writing on the designated pay date.

Poster. Employers must display a poster that details employees’ rights to paid sick leave. We anticipate the Labor Commissioner will provide employers with a model new hire notice and poster.

Recordkeeping. The Act requires an employer to keep at least three years of records documenting an employee’s hours worked, paid sick leave accrued and hours used. Should an employer not keep adequate records, the Act presumes that affected employees are entitled to the maximum number of paid sick leave accruable.

Penalties for Noncompliance

The Act assesses several penalties for noncompliance with its provisions. It also allows the Labor Commissioner to order any appropriate relief, including reinstatement and back pay, to individuals whose rights under the Act were violated.

Poster. An employer in violation of the Act’s posting requirement is subject to a $100 penalty per offense.

Withholding Leave. If an employer withholds accrued paid sick leave from an employee, the employee is entitled to the dollar value of the hours withheld multiplied by three, or $250, whichever is greater. This penalty is capped at $4,000.

Other Violations. Violations of any of the Act’s other provisions may result in a $50 per day penalty, up to $4,000 per violation. Employers may also be required to pay the state for the cost of investigating the violations, at a rate of $50 per day for each day a violation occurs. The $50 penalty can be assessed for each employee whose rights were violated and there is no cap on this assessment.

Earlier Effective Date

The Act expressly delays qualified employees’ entitlement to use paid sick leave until July 1, 2015. However, the remainder of the Act’s provisions arguably take effect January 1, 2015. This is because, under California law, a statute takes effect January 1 unless otherwise specified. We anticipate that legislation or other guidance will clarify the effective date of all the Act’s provisions. In the interim, the cautious course of action is to assume (and prepare for) a January 1, 2015 effective date for the Act’s accrual, notice, posting and recordkeeping provisions.

Next Steps

Employers can begin to prepare for the Act’s mandates in the following ways:

• Review and update employee handbooks
• Review collective bargaining agreements to understand which employees are covered by the Act
• Ensure payroll can properly calculate and track individual employees’ accrued and used sick leave, as well as provide employees with this information each pay date
• For employers with employees working in a California municipality that already has a paid sick leave ordinance (Long Beach, San Francisco and San Diego), check to ensure that these employees receive the benefit of both the applicable city ordinance and the Act, applying whichever law is more generous in the case of a conflict
• Train managers and benefits staff on how to comply with the Act

Additional Information

If you have any questions regarding California’s paid sick leave law, please contact your Kutak Rock LLP attorney or a member of our Employee Benefits Practice Group.