Now That You’ve Implemented the New Paid Sick Leave Rules Effective July 1, 2015…Time to Revise!
August 9, 2015

The new sick time rules went into full effect on July 1, 2015. Almost two weeks later, on July 13, 2015, the California Legislature passed AB 304 as a “fix it” bill, implementing key amendments to the Healthy Workplaces, Healthy Families Act of 2014 (“the Act”). These “emergency legislation” amendments were intended to “clarify” the original paid sick leave law and are immediately effective.

How Do We Accrue Sick Time?

The Act provided two options for granting paid sick leave: (1) front-loaded flat rates of no less than 24 working hours or three workdays (whichever is higher) of paid sick leave per year, or (2) accrual at a rate of no less than one hour for every 30 hours worked. AB 304 now permits employers to select alternative accrual methods, “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 by the 120th calendar day of employment, or each calendar year, or in each 12-month period.” Under this new provision, employers may select an alternative accrual method (preferably, one that is easier to track in payroll than the prior “one hour for every 30” option), as long as the employee is able to accrue at least 24 hours or three days (whichever is higher) within the initial 120-day period each year.

In addition, if your company had a Paid Time Off (PTO) policy in effect as of January 1, 2015, AB 304 also provides for a fourth method of granting sick time to employees. Employers may continue using their existing PTO accrual methods in place as of January 1, 2015, provided that:

  • the accrual is on a regular basis;
  • an employee earns no less than one day or eight (8) hours of accrued sick leave or PTO within three months of employment, each calendar year, or each 12-month period; and
  • the employee was eligible to earn at least three days or 24 hours of sick leave or PTO within nine months of employment.

Under this option, employers cannot change the specific accrual method used in their pre-January 2015 PTO policies, but can increase the accrual rate if they wish. If employers prefer to change (or have changed) the pre-January 2015 PTO accrual policy, the policy will no longer be compliant and employers must then choose one of the other available options.

How Do We Calculate the Amount of Sick Time To Be Paid?

Under the Act, employers must pay sick time at the employee’s regular rate of pay. For employees with fluctuating compensation, the Act requires that the employer conduct a 90-day look-back to average the employee’s rate of pay over the prior three months, paying sick time at that average rate. AB 304 now provides us with additional methods of calculating sick time for employees with different rates of pay.

For non-exempt employees with fluctuating compensation, sick leave may be calculated:

  • in the same manner as the regular rate of pay for the workweek in which an employee uses sick leave, whether or not the employee actually works overtime in that workweek; or
  • 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.

For exempt employees, employers must calculate paid sick leave the same way they calculate pay for any other form of paid leave.

Who Is Eligible for Paid Sick Leave?

The Act provided that an employee must work in California for at least 30 days to qualify for paid sick leave, naturally prompting the question of whether that meant 30 days for any employer in the state, or for this employer? AB 304 clarifies this point, providing that an employee must work for the same employer in California for at least 30 days to qualify for paid sick leave benefits. Note, however, that neither the Act nor AB 304 specifically provide for a 30-day waiting period before sick leave is granted to the employee; it is advisable to grant sick leave benefits to every new employee unless you know at the outset that the employee will work for you for less than 30 days.

Do I Really Have To Reinstate Sick Time If I Rehire My Employee?

The Act provides that any employee rehired at the same company within one year of termination or resignation will be entitled to reinstate any sick time in the employee’s bank at the time of departure. AB 304 provides that this reinstatement of prior sick leave is not required if the employer previously paid the employee for accrued sick leave at the time of the employee’s separation. Naturally, it would be less costly for the employer to skip payment of sick leave at termination of employment, given that very few separated employees are rehired at the same company.

What If I Give My Employees Unlimited Time?

AB 304 permits employers with existing unlimited sick leave or PTO policies to continue these policies, provided that they comply with the Act’s notice requirements by noting “unlimited” as a line item for paid sick leave on itemized paystubs for employees (or in any alternative writing).

Okay…Anything Else I Should Know?

AB 304 provides that the definition of “employee” does not include specified retired annuitants. It also provides that “an employee in the construction industry” means an employee performing work in that industry, thus deleting the reference to “onsite work” in the Act. AB 304 also delays the inclusion of paid sick leave on itemized wage statements or separate writings until January 21, 2016, but only for employers in the broadcasting and motion picture industries.

So, What Do I Do Now?

If any of the above provisions apply to you, or if you want to revise your sick leave policy to take advantage of these amendments, contact any of the employment attorneys at LightGabler to assist you with the new language. If you have not yet implemented a new paid sick leave policy as of July 1, 2015, no need to panic just yet – but contact us immediately to assist you so that you can implement this benefit before penalties are assessed.

If you have questions about paid sick leave, employee policies, or any other employment law question, contact the employment attorneys at LightGabler for assistance.

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