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July 14, 2015

Governor Signs Sick Leave Law Clean Up Legislation

On July 13, 2015, nearly two weeks after major provisions of California’s sick leave law took effect, the Governor approved “clean up” urgency legislation that clarifies several issues with the new law.  Among the highlights of Assembly Bill 304 are provisions expanding acceptable methods of sick leave accrual, and easing calculation of sick leave pay for employees with different rates of pay.  AB 304 (Gonzalez), which makes numerous other changes to the law, takes effect immediately.

AB 304 makes numerous changes to AB 1522 (2014), the Healthy Workplaces, Healthy Families Act of 2014, including:  

  • Providing that employers may use different accrual methods, other than providing one hour per every 30 hours worked. Such accrual methods may be calculated by day, by week, by month, by payroll period, or other accrual method, provided that sick leave or paid time off (“PTO”) is earned on a regular basis and that an employee accrues at least 24 hours of sick leave or PTO by the 120th calendar day of employment.
  • Allowing the employer to calculate the rate of pay for sick leave or PTO for non-exempt employees by: 
  1. Using the calculation for the regular rate of pay for the workweek in which the employee uses paid sick time; or
  2. Dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment. 
  • Allowing the employer to calculate the rate of pay for the sick leave or PTO for exempt employees “in the same manner as the employer calculates wages for other forms of paid leave time.”
  • Amending the law to provide a “grandfather” clause for sick leave and PTO policies that were in place prior to January 1, 2015, and either: 
  1. Satisfied the accrual, carry over, and use requirements of this section; or
  2. Provided paid sick leave or PTO to a class of employees before January 1, 2015, pursuant to a sick leave policy or PTO policy that used an accrual method different than providing one hour per 30 hours worked, provided that the accrual was on a regular basis so that an employee, including an employee hired into that class after January 1, 2015, has no less than one day or eight hours of accrued sick leave or PTO within three months of employment, and the employee was eligible to earn at least three days or 24 hours of sick leave or PTO within nine months of employment.  

    The grandfather clause provides that if an employer modifies the accrual method in the policy it had in place prior to January 1, 2015, the employer shall comply with any accrual method set forth in Labor Code Section 246(b), or frontload the full amount of leave.

    The grandfather clause also establishes that the sick leave law may be satisfied for certain state employees by providing: (1) sick leave benefits provided pursuant to Government Code Sections 19859 to 19868.3, or (2) annual leave benefits provided pursuant to Government Code Sections 19858.3 to 19858.7, or by provisions of a memorandum of understanding reached pursuant to Government Code Section 3517.5 that incorporate or supersede the above provisions of the Government Code.

AB 304 makes numerous other clarifications to the law, including:

  • Specifying that the law applies to an employee “who works in California for the same employer for 30 or more days within a year.”  The previous version of the law applied to an employee “who works in California for 30 or more days within a year from the commencement of employment.” 
  • Providing that the definition of “employee” does not include retired annuitants.
  • Specifying that an “employee in the construction industry” means an employee “performing work associated with construction” — deleting the reference to “onsite” from the previous version of the law.
  • Clarifying that if an employer provides unlimited paid sick leave or unlimited PTO to an employee, the employer may satisfy the existing law’s requirement regarding notice to the employee of the amount of sick leave available by indicating “unlimited” on the notice or the employee’s itemized wage statement.  
  • Delaying, until January 21, 2016, application of provisions related to the inclusion of the amount of paid sick leave available on itemized wage statements or separate writings for employers in the broadcasting and motion picture industries.
  • Providing that the employer is not obligated to inquire into or record the purposes for which an employee uses paid sick leave or PTO.
  • Providing that if an employee separates from an employer and is rehired by the employer within one year from the date of separation, the employer is not required to reinstate accrued PTO to an employee that was paid out at the time of termination. 

While AB 304 clarifies some ambiguities in the law, the legislation falls short of answering many of the questions that have surfaced for California employers attempting to implement the new law.  It is not known at this time if, or when, further guidance will be issued by the Division of Labor Standards Enforcement.  It is also anticipated that guidance will come from the courts as remaining ambiguities in the law are litigated, but it will be some time before such decisions work their way up to published opinions from courts of appeal.
In the meantime, California employers must ensure that they have a sick leave policy established as of July 1, 2015 that satisfies or exceeds the minimum requirements of the law.  Also, employers, other than those provided delay by AB 304 in the broadcasting and motion picture industries, must make sure they are reporting available sick leave or PTO to employees at the time each  employee is paid, either by including the tally in the itemized wage statement or by separate writing.

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