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December 4, 2014

California DLSE Publishes FAQ Regarding New Paid Sick Leave Law (AB 1522)

On December 2, 2014, the California Labor Commissioner, or Division of Labor Standards Enforcement (“DLSE”), published its Frequently Asked Questions (“FAQ”) on California’s New Sick Paid Law (The Healthy Workplaces, Healthy Families Act of 2014).
While the FAQ clarifies some ambiguities in the law, it does not address many of the questions employers have posed since the Governor signed AB 1522 in early September.  Thus, many questions remain, and hopefully additional guidance will be issued.  In the meantime, however, the DLSE confirmed that while the right to accrue and take sick leave under this law does not start until July 1, 2015, the law takes effect January 1, 2015, and certain actions by employers are required by that date.

Required Information to Be Provided Beginning January 1, 2015
Beginning January 1, 2015, employers are required to post in a conspicuous place at the workplace, a poster containing the following information: (1) that an employee is entitled to accrue, request, and use paid sick days; (2) the amount of sick days provided for and the terms of use of paid sick days; (3) that retaliation or discrimination against an employee who requests paid sick days or uses paid sick days or both is prohibited; and (4) that an employee has the right under this law to file a complaint with the DLSE against an employer who retaliates or discriminates against an employee.
The DLSE has published a new poster available on their website.  Employers may need to modify this poster to reflect their particular sick leave policy.

Second, after January 1, 2015, employers are required to provide non-exempt employees with an individualized Notice to Employee (required under Labor Code section 2810.5) that includes paid sick leave information.  A revised Notice to Employee form (available to employers for download at DLSE’s website) must be used for employees hired after January 1, 2015, and is optional for use prior to the January 1, 2015 effective date.  Use of the revised form prior to January 1, 2015, will be deemed compliant with the new requirement as of January 1, 2015; otherwise, for employees hired prior to January 1, 2015, the employer is required to provide a revised Notice to Employee or otherwise inform each employee of the information regarding paid sick leave within 7 days of the change, using any of the alternative methods specified in Labor Code section 2810.5(b).

Other Significant Clarifications
The DLSE has also attempted to clarify several points which may have caused some confusion for employers trying to implement the new law including:
• Temporary employees of a staffing agency are covered by the new law.  Therefore, whoever is the employer or joint employer is required to provide paid sick leave to qualifying employees.

• Paid sick leave accrues beginning on July 1, 2015 or the first day of employment if hired after July 1, 2015.  As such, the 12 month period will vary by hire date for those employees hired after July 1, 2015 and the measurement will mostly be tracked by the employee’s anniversary date.

• The DLSE explains its interpretation of why the law provides for different cap, accrual rates, and use limits: Under the accrual method, which is based on the number of hours an employee works, an employee may accrue more sick leave than can be used in a year. The amount of sick leave carried over to the next year may be subject to a cap if the employer establishes a cap policy.  In addition, use of sick leave by an employee may be limited to 3 days per year.

• The law requires employers with unlimited time off policies to separately track sick leave accrual and use of their employees.

• Employers must allow employees to use sick leave for preventive care or care of an existing health condition for an employee or a family member or for specified purposes if the employee is a victim of domestic violence, sexual assault or stalking.  Family members include the employee’s parent, child, spouse, registered domestic partner, grandparent, grandchild, and sibling.  Preventive care would include annual physicals or flu shots.  For partial days, an employer may require an employee to take at least two hours of leave, but otherwise the determination of how much time is needed is left to the employee.

• If an employee’s wage fluctuates (i.e. commission or piece rate), the rate of pay is calculated by dividing an employee’s total compensation for the previous 90 days by the number of hours worked.

• Payment for sick leave must be made to an employee no later than the payday for the next regular payroll period after the sick leave was taken and must be paid at the employee’s regular hourly wage.  Employers must include on a pay stub or a document issued the same day as the paycheck the amount of paid sick leave available to the employee.  Employers also must keep records showing how many hours an employee earned and used for three years.  This information may be stored on documents available to employees electronically.

• An employer need not cash out unused sick days upon termination unless the employer’s policy provides for a payout.  However, if an employee is rehired within 12 months, an employee can reclaim any unused paid sick days.
• For employees subject to local sick leave ordinances, the employer will have to comply with both the local and California laws, which may differ in some respects.  For each provision or benefit, the employer will have to provide whichever is more generous to the employee.  [We will have more information concerning local ordinances in a forthcoming Alert.]

• The state law providing for paid sick leave creates minimum standards for paid sick leave. Employers may use their existing policies so long as the specific policy complies with the minimum requirements of the law.  Where the employer provides additional terms (e.g., creates caps on maximum use or accruals above the minimums), they must inform employees of those additional terms. 

• The revised Notice to Employee form has a check box to inform an employee of an employer’s own policy that meets or exceeds the requirements of the new law.  To avoid misinformation or misunderstanding regarding an employer’s specific paid leave policy, employers are encouraged to ensure that employees are made fully aware of the terms and conditions of their specific policy which provides any additional paid sick leave terms. 

• Although the notice requirements of Labor Code section 2810.5 do not apply to employees who are exempt from the payment of overtime, employees who are exempt from the payment of overtime are covered by this new paid sick leave law.

• As an alternative to the accrual method of calculating sick leave, an employer can provide 24 hours or three days of paid sick leave to use at the beginning of each year.  No carryover of unused sick leave is required under this “up-front” or advance method.  Although the new law establishes a minimum requirement, an employer may continue to provide sick leave through its own PTO or paid leave policy provided the plan satisfies the accrual, carryover, and use requirements of the law or puts the full amount of leave into an employee’s leave bank at the beginning of the 12 month period.

The FAQ does not address what kind of documentation an employer can require, if any, under the law to substantiate sick leave use.  The FAQ also does not address what actions, if any, an employer may take if it obtains evidence or suspects abuse of sick leave by employees.  Hopefully, more guidance will be issued addressing these and other outstanding questions. 

Employers should note that this DLSE guidance is not binding on California courts, but would be considered persuasive authority as to how the law is to be interpreted.  The guidance would be followed in administrative wage and hour proceedings held before the DLSE.

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