Beginning on July 1, 2015, California employers must provide paid sick leave to employees. The Healthy Workplaces, Healthy Families Act (AB 1522) applies to all employers, regardless of size. The law requires either one hour of sick leave for every 30 hours worked or three days of sick leave per year. Employees accrue sick leave upon hire, although they may be restricted from taking earned leave until they have completed 90 days of employment.

The law has raised numerous questions. The California Department of Labor Standards Enforcement (DLSE) recently issued a set of “Frequently Asked Questions” (FAQs) and other guidance that address some of them.

Provisions of the Sick Leave Law Go Into Effect on January 1, 2015

AB 1522 requires employers to provide sick leave beginning July 1, 2015, but does not specify when provisions such as notice requirements go into effect. The DLSE has clarified that employers must display a poster regarding the new law on January 1, 2015.

The DLSE also requires employers to provide a revised “Wage Theft Prevention Act” notice to non-exempt employees hired after January 1, 2015. The notice now includes information about the employee’s entitlement to paid sick leave. Both the poster and revised notice are available on the DLSE’s website.

AB 1522 requires employers to notify employees of the amount of sick leave available on the employee’s wage statement or a separate document. The DLSE does not address whether this notification is required beginning January 1. The safest practice is to include the information on the wage statement before July 1 at the latest; and earlier if the payroll system will accommodate providing the new information.

Eligibility Requirements

The DLSE’s FAQs addresses employee eligibility. All employees who work 30 days per year or more in California are eligible upon hire, including temporary employees. However, because an employer may restrict employees from taking sick leave until they have worked 90 days, an employee who only works for a short period may never be eligible.

Accrual, Carryover, and Use Requirements

AB 1522 specifies that employers either may provide three days of paid sick leave or accrue one hour of sick leave for every 30 hours worked. The DLSE states that if an employer provides three days of sick leave, it must do so at the beginning of the year. The year commences on July 1, 2015, for current employees, and the employee’s anniversary date for later-hired employees. The DLSE does not state whether an employer can provide three days of sick leave on July 1, 2015 (or the anniversary date), and then provide three additional days on an alternate, uniform, date, such as January 1 of each year, to simplify the administrative burden of tracking individual employee entitlement to leave.

The DLSE points out in its guidance that an employee working full-time could accrue a little over eight days of sick leave per year, even though the employee could be limited to using three days per year. However, the law permits employers to cap earnings at 48 hours. An employer that wants to limit accrual to 48 hours should so state in its policy.

Rate of Pay

AB 1522 states that employees must be paid sick leave at their “hourly wage.” The law does not address how to calculate this amount when, for example, employees earn different hourly wages. The DLSE FAQs state that sick leave must be paid at the “regularly hourly rate,” taking into account various forms of compensation such as commissions. The DLSE intends to require employers to pay employees sick leave at the “regular rate” required for calculating overtime. For employees with fluctuating pay, the employer must divide the total compensation for the previous 90 days by the number of hours worked, and pay that rate.

PTO

Employer PTO policies may satisfy the sick leave obligation, but the option may not be attractive for all employers. 1522 states that sick leave need not be cashed out at the termination of employment. Employers are legally obligated to cash out unused PTO, however. Also, employers may not wish to pay PTO at the “regularly hourly rate,” as required for sick leave (according to the DLSE). Finally, PTO plans often apply only to certain employees, requiring employers to expand the benefit to temporary and other employees.

The DLSE FAQs make clear that an employer may have different policies for different employees, as long as all meet the legal requirements. Thus an employer with an existing PTO policy may decide to meet the sick leave obligation for employees who are already eligible for the benefit, but provide an alternate sick leave policy for employees who are not.

Other Laws

The DLSE guidance does not address the application of multiple sick leave laws. For example, it does not explain how employers should integrate the sick leave law requirements with “kin care” requirements or leave requirements under the Pregnancy Disability Leave law or California Family Rights Act.

The guidance also does not address how employers subject to local sick leave ordinances comply with both those ordinances and the state law. For example, Oakland recently enacted a sick leave ordinance that is similar to AB 1522, but has different accrual maximums and use requirements. It is not clear whether these benefits run concurrently with, or in addition to, sick leave provided under AB 1522.

Conclusion

The DLSE’s guidance helps clarifies some ambiguities in AB 1522. But many compliance issues remain unresolved. More guidance may be forthcoming. However, employers must now comply with the new law’s requirements and prepare for the July implementation.