New California Paid Sick Leave Law May Cause Headaches for Employers

Executive Summary: On September 10, 2014, California Governor Jerry Brown signed into law the Healthy Workplaces, Healthy Families Act of 2014 (HWHFA), which provides nearly all employees working in California with paid sick leave. The new law goes into effect on July 1, 2015

The new law requires any employer—however large or small—to provide most of their employees with at least three paid sick days. The law provides any employee who works at least 30 days in California within his or her first year of employment with paid sick leave, regardless of whether the employer is located in California or where the employee resides. While there are exceptions to the new law, the exceptions are very narrow. 

The new law permits an employee to use the leave not only for treating the employee’s or employee’s family member’s illness, but also if the employee is a victim of domestic assault, sexual violence and/or stalking.

How is the Leave Provided?

Generally, there are two methods of providing paid sick leave: an accrual method and a lump sum method. Under the accrual method, the employee must earn one hour of paid sick leave for every 30 hours worked. Accrual under this method is immediate, and employers cannot impose probationary periods on accrual. Any accrued but unused paid sick leave must be carried over to the following year; but an employer may impose accrual caps of up to 48 hours. Alternatively, employers can avoid the complicated requirements of the accrual method by using the lump sum method, which requires the employer to provide 24 hours of paid sick leave upfront for employee use.

Employers’ Obligations under HWHFA upon Termination

HWHFA does not require employers to pay out accrued and unused paid sick days at the end of employment unless such leave is provided under a paid time off (PTO) policy that allows the time to be used for sick leave. Regardless, the new law requires full reinstatement of any accrued and unused paid sick days for any employee who separates from employment and is rehired within one year. 

Employers who have pre-existing paid sick leave/PTO policies need not provide additional paid sick days. However, any pre-existing PTO policy must make available the same amount of paid leave, and must allow the leave to be used for the same purposes and accrue under the same conditions as required by HWHFA. 

Other Important Provisions 

Critically, the new law sets forth stringent anti-retaliation/discrimination provisions that prohibit employers from denying an employee’s right to use paid sick days or discriminating and/or retaliating against an employee for exercising his or her rights under the new law. 

The new law also includes detailed reporting and recordkeeping requirements including:

  • alerting new employees of their paid sick leave entitlement;
  • providing a table to employees every pay period that shows the amount of paid sick leave/paid time off hours accrued and used; and
  • maintaining any records of accrued and used paid sick time/paid time off for at least three years.

Employers’ Bottom Line:

Because of HWHFA’s intricate and complex requirements, clients are advised to have their sick time and leave policies reviewed to ensure compliance with the new law. Additionally, employers should be prepared to update their current payroll and recordkeeping and retention procedures and systems to comply with the new law. Employers also will need to provide training to managers and update existing policies regarding the new law’s provisions.