Legal Update: If Pain, Yes Gain – Part 113: California Officially Expands Statewide Paid Sick Leave Law

What You Need to Know:

• On September 13, 2023, the California legislature passed S.B. 616, which expanded the State’s existing paid sick leave mandate, the Healthy Workplaces, Healthy Families Act of 2014, in significant ways.
• On October 4, 2023, Governor Gavin Newsom signed the bill into law.
• The law takes effect on January 1, 2024.
• The amendments increase the annual amount of California paid sick leave from three days or 24 hours (whichever is greater) to five days or 40 hours (whichever is greater) for eligible employees. The increase to five days or 40 hours impacts several substantive topics, including the amount of available paid sick leave eligible employees can use in a year, and the amount of paid sick leave employers who frontload paid sick leave rather than accruing must grant each year to avoid accrual and year-end carryover obligations.
• Among other developments, the amendments also raise the California paid sick leave accrual cap from 48 hours to 80 hours.
• The law remains silent as to requiring documentation for use of paid sick leave, which signals that documentation should not be required when an employee is using their five days or 40 hours of paid sick leave protected by California law.

As we reported last month after the passage of S.B. 616, California has long been a leader in the paid sick leave space. Following last week’s enactment of S.B. 616’s amendments to the California Healthy Workplaces, Healthy Families Act of 2014, California is poised to once again shake up the paid sick leave landscape for employers across the State. Notably, this includes those with operations in municipalities that currently have local paid sick leave mandates in place – Berkeley, Emeryville, Long Beach, Los Angeles, Oakland, San Diego, San Francisco, Santa Monica, and West Hollywood.

Key Changes to California’s Paid Sick Leave Law

On January 1, 2024,[1] several key changes to California’s existing paid sick leave law will take effect:

• Increased Annual Paid Sick Leave Usage Cap. The amendments increase the annual paid sick leave usage cap from 24 hours or three days per year to 40 hours or five days per year (whichever is greater). The increased annual usage cap will apply whether an employer opts to accrue or frontload paid sick leave. Increasing the State’s annual usage cap to 40 hours will align California with a number of other state paid sick leave laws, including Arizona, Connecticut, Massachusetts, Michigan, New Jersey, Oregon, Rhode Island, and Vermont.
• Increased Alternative Accrual Rate. Although accrual under the California paid sick leave law generally calls for an accrual rate of one hour for every 30 hours worked, the current law permits employers to use a different accrual method as long as the employee receives no less than 24 hours of accrued paid sick leave by their 120th calendar day of employment and in each calendar year. The amendments afford employers an alternative to the 1 for 30 accrual method, but with an added wrinkle. Specifically, in addition to ensuring that employees accrue at least 24 hours of paid sick leave by their 120^thcalendar day of employment, employees must also accrue at least 40 hours of paid sick leave by their 200^thcalendar day of employment. For each benefit year after the first year of employment, employees must accrue at least 40 hours of paid sick leave per year.
• Increased Rolling Accrual Cap: The amendments also increase the current California paid sick leave rolling accrual cap (also known as “point-in-time” accrual cap and maximum accrual cap) and, by extension, year-end carryover cap from 48-hours or six-days to 80-hours or 10-days. Employers can avoid the accrual and carryover requirements by providing a frontload of paid sick leave at the beginning of each benefit year, as explained below.
• Increased Frontload Grant to Avoid Accrual and Carryover: Under today’s law, employers can avoid accrual tracking and year-end carryover of paid sick leave with a lump grant of at least 24 hours or three days (whichever is greater) of paid sick leave for new employees to use by their 90th calendar day of employment, and then each subsequent benefit year. Under the amendments, beginning January 1, 2024 employers who want to avoid accrual and carryover of paid sick leave will need to grant new hires at least 40 hours or five days (whichever is greater) of paid sick leave upon hire that is available to use by their 90th calendar day of employment, and then at the beginning of each subsequent benefit year.
• Impact on Local California PSL Laws.
  • Rolling Accrual Cap. Another wrinkle in S.B. 616 is how it impacts existing local California paid sick leave ordinances. While each existing local paid sick leave mandate in the State generally establishes an annual usage cap of at least 40 hours or 5 days of paid sick leave or other compensated time off per year (and most have usage caps that exceed the amended State standard), the impact of the increased rolling accrual cap (see above) will likely be more significant in these localities because many of the local ordinances currently have accrual thresholds lower than 80 hours or 10 days.
  • Partial Preemption. S.B. 616 also contains a new section which partially preempts local California paid sick leave ordinances that have different substantive standards on the following topics: (a) advances on paid sick leave before it accrues; (b) reinstatement of earned, unused paid sick leave upon rehire; (c) balance notification each pay period; (d) rate of pay for sick leave and the timing of such pay; and (e) employee notice to employers for planned and unplanned paid sick leave use.
• Expanded Application to Employees Covered by Collective Bargaining Agreement.
  • To date, the California paid sick leave statute contains an exemption for certain employees covered by a valid collective bargaining agreement (“CBA”) assuming the CBA meets several conditions. The specific conditions that must be satisfied extend beyond just paid sick leave or paid time off, and also impact the topics of dispute resolution and rates of pay within the CBA.
  • S.B. 616 changes the application of California’s paid sick leave law to employees covered by CBAs where the CBA qualifies for the above exemption. Specifically, beginning January 1, 2024, employers that rely on the CBA exemption must satisfy certain aspects of the CA paid sick leave law including reasons for use, no requirement to find a replacement worker, and no retaliation for use of paid sick leave (which would appear to include counting use of paid sick leave as an instance of absence for disciplinary purposes).

Employer Takeaways

We will continue to monitor the California Labor Commissioner’s activities for further updates on the California Healthy Workplaces, Healthy Families Act of 2014 amendments, including potentially updated FAQs and Wage Theft Prevention Act Notices.  In the meantime, as the S.B. 616 amendments’ January 1, 2024 effective date approaches, here are some steps to consider:

• Review existing sick leave or PTO policies and practices, including those in a California locality with a separate local paid sick leave mandate, and either implement new policies and practices or revise existing policies and practices to ensure compliance with the amendments, while doing the same for any related attendance, conduct, anti-retaliation, and discipline policies and practices.
• Train supervisory and managerial employees, as well as HR, on the new requirements.
• Monitor the California Labor Commissioner’s website for the release of administrative guidance on employers’ paid sick leave compliance obligations in light of the amendments.
• Prepare to update onboarding packets for non-exempt workers with an updated Wage Theft Prevention Act Notice reflecting the changes to CA law, if needed.

With the paid leave landscape continuing to expand and grow in complexity, we encourage companies to 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 leave developments, please click here to sign up for Seyfarth’s Paid Leave mailing list.  Companies interested in Seyfarth’s paid sick leave laws survey should reach out to sickleave@seyfarth.com.

 

[1] January 1, 2024 is also the date that the new Illinois “paid leave for all workers act” and new Minnesota statewide paid sick and safe time law go into effect.