If Pain, Yes Gain—Part 89: New York City Council Passes Amendments to Existing PSL Law to Align with Statewide PSL Law Taking Effect on September 30; State Remains Silent on its Looming PSL Mandate

Seyfarth Synopsis: On Wednesday, September 23, 2020, the New York City Council adopted legislation that would amend the City’s existing Earned Safe and Sick Time Act (“ESSTA”) in light of the New York State paid sick leave (“NYPSL”) law taking effect on September 30, 2020. If signed into law by Mayor De Blasio, after a hearing scheduled on Monday, September 28, the City’s ESSTA amendments will take effect on September 30, as well. In addition to requiring benefits aligned with those under the NYPSL law, the amendments would impose distinct new obligations on City employers and impact certain existing ESSTA obligations.

On September 30, 2020, Empire State employers will be subject to the requirements of the NYPSL law enacted on April 3, 2020.[1] Less than a week out, the State has not yet issued guidance or regulations on the NYPSL law, leaving employers across the State in the dark on a number of gray areas with respect to their obligations given the text of the law as enacted. Significantly, the ESSTA amendments[2] adopted by the City Council appear to offer the City’s interpretation of some of the ambiguous provisions of the State’s PSL law.

While it is not yet clear whether ESSTA will ultimately be amended, such action appears to be a high possibility.[3] As the amendments would also take effect on September 30, 2020, City employers could potentially find themselves in a time crunch to get into compliance with their new ESSTA obligations.

With potential interpretations of the NYPSL law and new/revised ESSTA obligations on the table, here are some of the highlights from the ESSTA amendments passed by the City Council.

• Covered Employees: Under the current ESSTA, employees must be employed in New York City for more than 80 hours in a calendar year in order to fall within the definition of “employee.” The amendments would strike the more than 80 hours of employment in the City in a calendar year language/employee eligibility requirement.
• Obligation to Provide Paid Leave: Under the NYPSL law, employers with four or fewer employees and a net income of less than one million dollars during the previous tax year are permitted to provide up to 40 hours of unpaid sick leave. ESSTA currently permits the same for all employers with less than 5 employees in a calendar year. If signed into law, the ESSTA amendments would expressly require employers with 4 or fewer employees and a net income of one million or more dollars in the previous tax year to provide benefits conforming with the requirements of the NYPSL law.
• Accrual Rate and Caps: ESSTA currently requires accrual of leave at a rate of 1 hour of leave for every 30 hours worked, and the NYPSL law will require the same. However, right now, ESSTA permits all employers, regardless of size, to cap annual leave accrual at 40 hours. The NYPSL law will cap accrual at 40 hours for employers with 99 employees or less; however, employers with 100 or more employees will be required to provide accrual of up to 56 hours of leave annually. The ESSTA amendments would conform accrual caps with the NYPSL law.
• Frontloading: The current ESSTA does not — at least directly — address frontloading the full amount of leave required at the start of each year.[4] The legality of doing so in lieu of accrual was nonetheless confirmed by the ESSTA FAQs. The amendments to ESSTA do not alter the current City Code’s vague language on frontloading. The NYPSL law expressly provides that frontloading the full amount of leave at the start of each year is permissible in lieu of tracking accrual, and given the intent of the ESSTA amendments to align with the NYPSL law and the above points, there is a high probability City employers would be permitted to frontload the full amount of leave required in lieu of tracking accrual.
• Start of Accrual: Under the NYPSL law, employees begin earning leave upon commencement of employment or the law’s September 30 effective date, whichever is later, and the same commencement of employment or law’s effective date standard is currently provided for under ESSTA. The ESSTA amendments would provide that accrual begins upon commencement of employment or “the effective date of the local law that created the right to such time, whichever is later.” It appears this is the City Council’s way of noting that employees who would be entitled to leave benefits previously not provided to them by ESSTA (e.g., because of not meeting the over 80 hours of work in the City in a year eligibility threshold or working for an employer with less than 5 employees and a net income of one million or more dollars in the previous tax year, and receiving unpaid leave) must begin accruing their new leave benefits as of September 30 or upon commencement of employment if later, if the amendments are signed into law.
• Eligibility to Begin Using Accrued PSL: ESSTA currently permits employers to impose a waiting period of up to 120 calendar days following an employee’s commencement of employment before leave can be used. In contrast, the NYPSL law provides employees need not be permitted to begin using accrued leave until January 1, 2021, and notably does not otherwise appear to permit an employer-imposed usage waiting period on new hires. The ESSTA amendments, conforming with NYPSL, would remove the usage waiting periods for newly hired employees and instead provide that employees are entitled to use leave as it is accrued.
  • Note - Use of PSL in 2020: The ESSTA amendments would make an exception to the requirement that employees be permitted use leave as it accrues in 2020. Employers obligated to provide accrual of leave up to 56 hours per year or 40 hours of paid leave per year due to ESSTA aligning with the NYPSL law would not be required to permit use of additional or new accruals in 2020. In addition to aligning with the NYPSL law, City employers obligated to permit up to 40 hours of paid/unpaid leave use per year under ESSTA at this time will be protected from employee windfalls that would otherwise be possible because of more generous accrual and annual use provisions under the State law in effect in 2020, despite no State requirement to permit use of leave before 2021.
• Carryover and Annual Use: ESSTA currently provides that up to 40 hours of accrued, unused leave can be carried over at year-end to the following year; however, regardless of potential balances in excess of 40 hours, employers are permitted to limit employees’ leave use to 40 hours per year. ESSTA also provides that employers can avoid year-end carryover obligations by paying employees for accrued, unused leave at year-end and frontloading at least 40 hours of leave at the start of the next year. While the City mandate does not touch on whether frontloading at least 40 hours of PSL each year and upon commencement of employment eliminates employers’ carryover obligations, the ESSTA FAQs advise that such “use it or lose it” practices are permissible where sufficient frontloads are provided.

In contrast, the NYPSL law expressly requires year-end carryover, but is silent on both (a) whether frontloading the required amount of leave upon hire and the start of each year eliminates year-end carryover obligations; and (b) whether employers can cap the amount of unused leave carried over by employees at the end of each year. However, the NYPSL law does provide that regardless of carryover balances and leave earned the next year, employers can limit employees’ leave use to 40 or 56 hours per year depending on employer size. The ESSTA amendments would permit employers to (1) cap year-end carryover at 40 or 56 hours depending on their size; and (2) avoid year-end carryover where employees are paid out for accrued, unused leave at year-end and provided a 40 or 56 hour frontload depending on employer size at the start of the subsequent benefit year.

• Increments of Use: Something not entirely clear in the ESSTA amendments is the permissible minimum increment of leave use employers can require. The amendments, like the NYPSL law, provide that reasonable minimum increments on use of PSL can be set, but such increments cannot exceed four hours. Both the current and amended ESSTA align on this point. The ESSTA Rules in the New York City Code of Rules and Regulations and the NYPSL FAQs; however, together provide that (a) no more than 30 minute increments of use be imposed after an initial increment of no more than 4 hours; and (b) where an employee has yet to accrue 4 hours of leave, it would not be “reasonable” to require use of leave in a 4-hour increment. Because these requirements are not included in the ESSTA amendments passed by the City Council, it is unclear whether such requirements will still be in play if the ESSTA amendments are signed into law.
• Rate of Pay: ESSTA requires that leave be compensated at the same rate as the employee earns from his or her employment at the time it is used. The amendments would do away with this language, and like the NYPSL law, require that leave be paid at the employee’s regular rate of pay. However, while the NYPSL law provides that employees cannot be paid less than the applicable minimum wage under the NYLL, the ESSTA amendments provide that the rate of pay “shall not be less than the highest applicable rate of pay to which the employee would be entitled pursuant to [the NYLL] or any other applicable federal, state, or local law.”
• Employee Notice of PSL Use and Documentation: The ESSTA amendments would leave in place the current ESSTA’s provisions on permissible employer notice and documentation requirements.[5] The NYPSL law, however, could potentially call into question the propriety of these express provisions, as the State law is particularly vague in terms of when and what type of notice an employee must provide to an employer when using leave and what documentation an employer can require an employee to submit in order to verify permissible PSL use, if any, as well as when such documentation can be required. While it remains to be seen whether ESSTA’s notice and documentation provisions will be compliant with the NYPSL law or employers will need to defer to the latter in order to simultaneously comply with State and City law, one key impact of the ESSTA amendments if passed will be that employers who require reasonable documentation as permitted by the City law will be required to reimburse employees for all reasonable costs or expenses incurred for the purposes of obtaining such documentation.
• Notice and Posting: Since ESSTA was amended in 2018, employers have been required to distribute written notice of certain leave rights and information on the benefit year in English and the primary language of the employee if an agency translation has been made available, within 30 days of the effective date of the 2018 amendments or upon commencement of employment if later. Employers are permitted, but not required, to also post the notice conspicuously at their business location in an area accessible to all employees. If signed into law, the ESSTA amendments would require updated notices of rights to be distributed to employees upon commencement of employment, and for employees employed prior to September 30, the updated notice would need to be provided within 30 days of the effective date. Additionally, employers would be required to also post the notice conspicuously at their business location in an area accessible to all employees. The amendments contemplate that if signed into law, the enforcement agency will make such notices available in a number of languages. As a reminder, the NYPSL law is silent on whether employers must distribute or post notice of employees’ leave rights, though there is a pre-existing NYLL requirement that employers providing fringe benefits such as leave provide notice to employees of the same, including via written policies distributed to employees or posted in the workplace.
• Available Balance Notification: ESSTA does not currently require employers to provide employees with notice of their leave accrued, used, and/or available for use upon employee request, on their paystubs, or otherwise. The amendments, however, would require employers to provide the amount of leave accrued and used during a pay period and an employee’s total balance of accrued leave via a pay statement or other form of written documentation provided to employees each pay period. Notably, the amendments do not expressly incorporate the NYPSL law’s requirement that employers provide a summary of leave accrued and used by an employee in the current and/or any previous calendar year, upon the oral or written request of an employee, within 3 business days of the request.
• Additional Amendments and Provisions Left in Place: There are a number of other amendments to ESSTA that would take effect if the City Council’s adopted amendments are signed into law, including but not limited to: (a) safe time reasons for use being updated to include domestic violence as defined by New York State law; (b) removal of the existing definition of retaliation and revised provisions relating to prohibition of the same; and (c) new investigatory and enforcement powers for the City agency enforcing ESSTA, most notably with respect to potential civil fines and penalties assessed. Similarly, certain provisions of ESSTA were left in place, despite silence on and/or potential conflict with the same under the NYPSL law, including but not limited to: (1) the definition of employer providing that size can be determined by using the average number of employees working per week during the calendar year when the number of employees working weekly during the year varies the NYPSL law’s silence on this point other than providing that all employees working for an employer in a calendar year are counted for purposes of determining size and benefit obligations; (2) an obligation to create and maintain leave records for a three year period despite the State law requiring the same for a 6 year period; and (3) an obligation to reinstate employees’ accrued, unused leave in the event of separation from employment and subsequent re-hire within 6 months of separation despite the NYPSL law being silent on reinstatement of leave benefits upon separation and re-hire within a certain period of time.
• Stopgap: Critically, the ESSTA amendments provide “[w]here [the NYPSL law] or any regulation issued thereunder, sets forth a standard or requirement for minimum hour or use of safe/sick time that exceeds any provision in this chapter, such standard or requirement shall be incorporated by reference.” As a result, it is possible that certain provisions of ESSTA as amended that are potentially in conflict with the NYPSL law will not apply where the latter is more generous to employees. More significantly, as the State has not yet adopted leave regulations and it does not appear that such action will be taken in the coming days, it is possible that certain requirements in ESSTA as amended may be enforced initially and eliminated at a later time, if the amendments become law.

Despite the NYPSL law taking effect in less than a week, there are a number of “unknowns” regarding employers’ obligations under the same. The same can be said for City employers given, among other things: (a) their coverage by the NYPSL law and its outstanding ambiguities; and (b) the September 28, 2020 hearing scheduled by Mayor De Blasio and September 30, 2020 effective date of the ESSTA amendments if signed into law. What is clear, however, is that both State and City employers' leave obligations are in for a significant change in the immediate future.

We will continue to monitor NY State and City leave developments and update employers as appropriate. In the meantime, here are some steps to consider:

• Monitor the New York State Department of Labor’s website for the release of administrative guidance and/or regulations on employers’ leave obligations.
• Monitor the City Council and Mayor’s websites for updates on the status of the ESSTA amendments, and if signed into law, the New York City Department of Consumer and Worker Protection’s website for updated administrative guidance and/or regulations on employers' leave obligations, as well as updated model notices and posters, in light of ESSTA as amended.
• Review existing sick leave policies and practices, and either implement new policies and practices or revise existing policies and update existing practices, while doing the same for any related attendance, conduct, anti-retaliation, and discipline policies and practices.

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 these laws and paid leave requirements more generally. 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 sickleave@seyfarth.com.

 

[1] For more information on the NYPSL law, which is separate from the State COVID-19 Emergency Leave Law in effect since March 2020, see our prior Legal Updates here and here. For more information on the COVID-19 Emergency Leave Law, see our prior Legal Update here.

[2] For more information on ESSTA, which originally took effect in 2014 and was amended in 2018, see our prior Legal Update here.

[3] The City Council’s website has a page devoted to the history of the ESSTA amendments – Int. 2032-2020 – and subsequent action to be taken on the same available here. This webpage also contains the text of the amendments as adopted by the City Council.

[4] Rather, as noted in our “Carryover and Annual Usage” section below, frontloading the full amount of leave is addressed only in the context of an employer who opts to pay out accrued, unused leave at year-end.

[5] ESSTA provides, among other things, that (1) notice of foreseeable leave use cannot be required more than 7 days in advance and notice of unforeseeable leave use can only be required as soon as practicable; and (2) after an absence of more than 3 consecutive workdays, employers can require employees to provide reasonable documentation to verify their need to use leave for a covered reason, and certain types of documentation will be considered reasonable depending on whether the employee was absent for “sick” or “safe” time reasons.