If Pain, Yes Gain—Part 101: New Mexico Paid Sick Leave Law in Effect Today; Final Rules, Model Poster and FAQs Available

Seyfarth Synopsis: The New Mexico statewide paid sick leave law is in effect as of today, July 1, 2022.  The state recently released a series of related materials—final rules, detailed FAQs, model posters, a policy compliance checklist, and a guide to the law.  The combination of these materials has resulted in significant updates to the substantive aspects of the law and covered employers’ corresponding compliance obligations.

The New Mexico Healthy Workplaces Act (the “Act”), which is in effect today, July 1, 2022,[1] requires covered employers to provide eligible employees with paid sick leave and permits use of up to 64 hours of paid sick leave per year. While it is the state’s first paid sick leave law, some Bernalillo County employers have been dealing with a separate paid time off mandate, the Bernalillo County Employee Wellness Act, since October 1, 2020.[2]  Seyfarth’s April 2021 Legal Update provides an overview of the statewide Act, noting that there were several unanswered questions about its implementation and compliance requirements. 

The New Mexico Department of Workforce Solutions (the “Department”) held a public comments hearing on April 5, 2022 to obtain input and public comment on the proposed rules for the Act.  The discussion was continued on May 24.  In the weeks that followed, the Department released a number of administrative materials pertaining to the Act, including detailed FAQs, model posters, a policy compliance checklist, and a guide to the Act, all of which provide important updates, clarifications, and other related substantive details about the Act. Then, on June 23, 2022 the proposed rules were finalized and published, imposing another layer of standards that employers must adhere to in practice.

Below are key highlights of the newly released Final Rules and administrative materials:

• Employee Eligibility: As a reminder, “employee” is defined under the Act to generally include any individual employed by an employer for remuneration, including part-time, seasonal, and temporary basis employees. The FAQs provide that the Act is designed for employees who perform work in the state to accrue paid sick leave. Thus, regardless of whether an employer’s physical business is based in New Mexico or out of state, its employees performing services in New Mexico must accrue paid sick leave.
• Accrual Rate: As a reminder, the Act has an accrual rate of one hour of paid sick leave for every 30 hours worked. The Final Rules explain that hours worked above 40 hours per seven-day work week do not accrue paid sick leave at a faster rate (i.e., the one for 30 rate still applies to these hours). The FAQs also include information on accrual for a number of different topics, such as (a) salaried non-exempt employees, (b) travel time and how travel time could be factored into an employee’s accrual of paid sick leave, and (c) accrual considerations for hours paid but not worked, including “on call” time.
• Accrual Cap:
  • No Cap Allowed: While employees are not entitled to use more than 64 hours of paid sick leave per year, the FAQs confirm that there is no cap on accrual under the Act. In fact, the FAQs expressly state that “it is illegal” to cap the number of hours an employee can accrue.
  • Frontloading Does Not Eliminate Accrual Tracking: Notably, the FAQs clarify that frontloading paid sick leave at the start of each benefit year does not get rid of an employer’s requirement to track employees’ hours worked. So, even if an employer were to frontload an employee 64 hours of paid sick leave per year, which equates to working 1,920 hours, an employer must allow an employee to accrue additional sick leave based on their hours worked in excess of 1,920 hours in that year.
  • Accrual Setups Can Vary for Different Employee Groups: Per the FAQs, an employer can use different paid sick leave accrual setups for different workers. As an example, an employer could theoretically frontload sick leave for some employees while allowing other employees to accrue sick leave, as long as both methods are otherwise compliant with the Act.
  • Transition Year Accrual: Another significant development from the FAQs involves the 2022 “transition” year. The FAQs state that an employer may not offset its New Mexico paid sick leave obligations with leave employees already earned or used since January 1, 2022. As a possible practical solution, the FAQs state that starting July 1, 2022, an employer may frontload employees their anticipated hours of accrued leave for the rest of 2022. Potential employer challenges and costs on this point will vary somewhat depending on the specific benefit year being used for New Mexico paid sick leave compliance.[3]
• Year-End Carryover: Under the Act, it was unclear if (a) there was a cap on how many hours of earned, unused sick leave carry over at year-end, and (b) whether frontloading a sufficient amount of paid sick leave at the start of the year permitted a “use it or lose it” setup for unused sick leave at year-end. We now have clarity on both points.
  • Year-End Carryover Cap Permitted: The Final Rules, as well as FAQs, clarify that an employer may impose a cap of 64 hours on year-end carryover.
  • Frontloading Does Not Eliminate Year-End Carryover: It is now clear from the FAQs that frontloading does not get rid of an employer’s year-end carryover obligations. Even though frontloading does not eliminate year-end carryover, the Act allows for a 64-hour annual usage cap.
• Year-End Cash-Out: Another FAQ addresses the topic of year-end cash outs of earned, unused paid sick leave. The FAQ explains that an employer may only cash out earned, unused sick leave at year-end above 64 hours. Thus, if, for example, an employee has 50 hours of earned, unused sick leave at year-end, the employer cannot cash out that time but must, instead, carry it over to the following year.  However, if an employee instead had 80 hours of earned, unused sick leave at year-end, the employer can choose to either forfeit or cash out the hours above 64.
• Frontloading Proration: As noted above, while employers are permitted to frontload sick leave, the FAQs indicate that an employer can prorate such time for new hires, but not for part-time employees.
• Reasons for Use: Under the Act, paid sick leave can be used for an employee’s own illness, a family member’s illness, preventive medical care, meetings at a child’s school or place of care related to the child’s health or disability, or certain safe time absences related to domestic violence, sexual assault, or stalking of the employee or their family member. The FAQs include non-exclusive examples of the types of events that qualify as permissible purposes, including (a) dental treatment, (b) medical conditions related to pregnancy or childbirth, (c) acupuncture, (d) child’s IEP meeting, (e) personal illness or the illness of a family member, (f) surgical procedures, and (g) mental health therapy and counseling.
• Usage Waiting Period: The FAQs clarify that there is no usage waiting period for new hires. Newly hired employees may immediately use any earned sick leave.
• Notice to Employer: Under the Act, employers must provide paid sick leave upon the oral or written request of an employee or an individual acting on the employee’s behalf. The Act contains specific notice standards for both foreseeable and unforeseeable absences. The Final Rules clarify that “foreseeable” means an employee is aware of the need to use paid sick leave seven or more days before such use.
• Documentation: Under the Act an employer may require reasonable documentation that paid sick leave has been used for a covered purpose if the employee uses available sick leave on two or more consecutive work days. The Act provides examples of documentation that is considered reasonable. The Final Rules explain that if an employer requires an employee to provide such documentation, the employer must allow the employee at least 14 days from the date they return to work to submit the documentation.
• Cannot Require Use of Sick Leave: The FAQs expressly state that employers cannot require employees to use available paid sick leave.
• Use of Non-Sick Paid Time Off for Sick Leave Law Compliance: Under the Act, employers with paid time off policies can use those policies to comply if the policy (1) makes available an amount of paid sick leave that meets the accrual requirements of the Act, and (2) permits that the time be used (a) under the same purposes and (b) under the same terms and conditions that the Act requires. The FAQs contain a number of updates involving use of non-sick paid time off (i.e., unlimited PTO, PTO, vacation, personal time, etc.) for paid sick leave compliance. Here are some highlights.
  • Use of Unlimited Paid Leave: If an employer has an unlimited paid leave policy and intends to apply that policy for compliance with its New Mexico paid sick leave obligations, the policy will be considered compliant if it allows the leave to be used for all the same purposes and under the same or more generous terms and conditions as the Act requires, including those related to notice and documentation. The FAQ further notes that the employer must keep track of any time used for purposes of the Act.
  • Use of PTO for Non-Paid Sick Leave Reasons and Notice to Employees: If an employer has a single PTO policy that incorporates the requirements of the Act and an employee uses all their PTO, the FAQs indicate that the employer does not need to provide additional PTO to the employee if they get sick. The New Mexico Labor Relations Division of the Department recommends that employers make this clear to employees.  The FAQs reiterate though that the PTO must be subject to the same usage, accrual, carryover, and other requirements of the Act.
  • Required Conditions: Consistent with the corresponding statutory provision (see above), the FAQs state that employers who choose to use a single PTO policy for compliance with the Act must ensure that their policy tracks the Act’s requirements in every regard. For instance, employees must start accruing leave upon hire; the policy must provide the same or more generous accrual, carryover, and use benefits; employees must be allowed to use the PTO for all of the same purposes permitted by the Act, including those related to family members; and the policy must incorporate the Act’s rules on recordkeeping, notice, and payment for leave used.
  • PTO Policies Providing More Generous Leave: The FAQs also include information for employers who provide more generous PTO benefits than the Act requires.
• Balance Notification: The Act itself did not have any specific obligation in terms of paid sick leave balance notification requirements. However, the Final Rules and FAQs impose a balance notification requirement on employers. The Final Rules state that employers must provide employees with an accurate year-to-date written summary of paid sick leave accrued and used at least once every calendar quarter.  The Rules identify multiple ways an employer can satisfy this requirement — electronically, including by email, website, mobile application or other reasonable method.  In addition, if employers include this information on pay records or earnings statements provided to employees according to their normal pay schedule, they will be considered in compliance.
  • Notification Where Employee Balance Greater Than Usage Cap: While employers can never cap an employee’s paid sick leave accrual, an employee’s annual sick leave usage can be capped at 64 hours. The FAQs state that an employer who caps paid sick leave use should notify its employees that sick leave balances may not reflect the number of hours they will be allowed to use in a given year (i.e., that it is possible for an employee’s paid sick leave balance to exceed 64 hours, and in such instances, usage is still capped at the 64-hour limit).
• Notice and Posting: The state has now released model posters in English (both letter size and 11x17) and Spanish (both letter size and 11x17). As a reminder, the poster must be displayed, in both English and Spanish, as well as any other language that is the first language spoken by at least ten percent of an employer’s workforce, in a conspicuous and accessible place in any location at which employees are working. In addition, the Act calls for a separate notice requirement involving at least new hires. Specifically, an employer must give written or electronic notice to an employee at the commencement of employment of a number of substantive details about the Act.  The FAQs confirm that the model posters may be used to comply with the written notice requirement for new hires.  The FAQs also provide that a fully-remote business may display notices by website, email, or other electronic communication or publishing that employees may easily access.
• Payment of Sick Time: Under the Act, paid sick leave must be paid at the same hourly rate and with the same benefits, including health care benefits, as an employee normally earns during hours worked; however, it cannot be less than the applicable minimum wage rate. The Final Rules include additional payment of sick time content regarding employees with fluctuating hours, salaried employees, per diem employees, and shifts of indeterminate length. There also is an FAQ involving “scheduled overtime” noting that if an employee who already worked 40 hours in a given week is scheduled to work an overtime shift and calls in sick, the employer must pay the employee according to those regularly scheduled weekly hours, even if greater than 40.

Employer Takeaways:

As the New Mexico statewide Healthy Workplaces Act is now in full effect, covered employers should consider taking the following steps:

• Monitor the New Mexico Department of Workforce Solutions’ and Labor Relations Division’s websites for the release of further guidance.
• Review sick leave or PTO policies and procedures to ensure that they meet at least the minimum requirements of the Act and recently-released Final Rules and administrative materials.
• Develop a New Mexico paid sick leave policy that complies with the Act for any employees who are not covered under the employer’s existing paid sick leave or PTO policies.
• Review and, as necessary, revise anti-retaliation, attendance, conduct, and discipline policies to prevent retaliation against employees for taking time off under the Act.
• Train supervisory and managerial employees, as well as HR, on the Act’s requirements.

With the paid leave landscape continuing to expand and grow in complexity, companies should reach out to their Seyfarth contact for solutions and recommendations on addressing compliance with paid leave requirements. To stay up-to-date on Paid Sick Leave developments, click here to sign up for Seyfarth’s Paid Sick Leave mailing list.  Companies interested in Seyfarth’s paid sick leave laws survey should reach out to paidleave@seyfarth.com.

 

[1] Including New Mexico, the states that have enacted a statewide general non-COVID-19 paid sick leave or PTO mandate include: (1) Arizona; (2) California; (3) Colorado; (4) Connecticut; (5) Maine (PTO law); (6) Maryland; (7) Massachusetts; (8) Michigan; (9) Nevada (PTO law); (10) New Jersey; (11) New Mexico; (12) New York; (13) Oregon; (14) Rhode Island; (15) Vermont; and (16) Washington. In addition, (17) Virginia has a statewide paid sick leave law that applies only to certain home health workers. There also are non-COVID-19 paid sick leave mandates in (18) Washington, D.C. and nearly two dozen municipalities.

[2] A summary of the initial version of the Bernalillo County, NM mandatory PTO ordinance can be found here.

[3] Per the Act, an employer may use one of the following methods for determining the 12-month period for which New Mexico paid sick leave may be used: (1) the calendar year; (2) any fixed 12-month leave period, such as a fiscal year, a year required by other law, or a year starting on an employee’s anniversary date; (3) the 12-month period measured forward from the date of an employee’s first use of earned sick leave occurs; or (4) a rolling 12-month period measured backward from the date an employee uses any earned sick leave.