California paid sick leave became effective on July 1st. The Governor signed a new bill (AB 304) on July 14th (effective immediately) to clarify a few issues:
First, the bill provides some clarity on how to calculate the pay rate for sick leave (an issue that was proving very challenging to implement). Employers now have two options for non-exempt (hourly) employees, as follows:
- Calculate paid sick leave in the same manner as the regular rate of pay for overtime purposes is calculated for the workweek in which paid sick time is used, whether or not the employee works overtime in that workweek. Therefore, employers who are already set up to include all forms of non-discretionary compensation (such as commissions, shift premiums and service charges) into the overtime rate, can simply use those calculations for the sick pay rate.
- The prior option, which is to divide 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. If employers have already figured out a formula for this option, they can continue to use it.
For exempt (salaried) employees, the bill clarifies that the sick pay rate shall be calculated in the same manner as the employer calculates other forms of paid leave time.
Second, the bill provides for alternate accrual methods other than one hour for each thirty hours worked, provided that the accrual is on a regular basis and the employee will have 24 hours of paid sick leave available by the 120th calendar day of employment. Presumably, this is to give employer’s some latitude to accrue with less math involved, and another alternative to the 24 hour upfront method.
Third, the bill clarifies that an employer may limit an employee’s use of paid sick days to 24 hours or 3 days either: (1) in each year of employment (i.e. by anniversary year); or (2) in each calendar year; or (3) in any specified 12-month period.
Fourth, the bill permits employers who provide unlimited sick leave to satisfy notice requirements by indicating “unlimited” on the paystub (instead of having to show the number of hours accrued).
Fifth, the bill states that sick pay need not be reinstated to an employee rehired within a year if it was paid out as PTO at the time of separation, and that the amount reinstated need only be the minimum amount accrued under the statute (i.e. no more than 48 hours or 6 days). Therefore, if the employer had a larger cap, the entire balance need not be restored.
Sixth, the bill clarifies that an employee must work for 30 days with the same employer (not just within California) to be eligible for paid sick leave.
Seventh, the bill includes a complicated grandfather clause for employers who provided paid sick leave or paid time off before January 1, 2015, and used a different accrual method than one hour in every 30 hours worked. This clause allows for a slower accrual as long as the employee accrues eight hours of paid sick leave in the first three months of employment and was eligible to earn 24 hours of sick leave or paid time off within nine months of employment.
Finally, the bill provides that the record keeping requirements do not include maintaining documentation of the purposes for which an employee uses paid sick time.
A few issues on my wish list that were not addressed include:
- Whether the 24 hour minimum can be pro-rated for employees who work much less than an 8 hour day so that sick time is three days of their normal shifts (it would be great if they could but for now employers are stuck with 24 hours);
- Whether the 24 hour minimum needs to be adjusted up for employees who typically work over 8 hours per shift (an interesting question and the safe answer is likely that the hours need to be adjusted up);
- Why sick leave must be available in two hour increments to exempt employees, and can’t be limited to use in either half or full days (to me this seems to undermine exempt status); and
- Why these issues weren’t clarified before the July 1st rollout deadline!