Legal Update: If Pain, Yes Gain – Part 111: California State Legislature Passes Amendments to Statewide Paid Sick Leave Law

What You Need to Know:

• In what promises to be a tectonic shift in California’s paid sick leave landscape, on September 13, 2023 the California legislature passed S.B. 616, which is expected to expand the State’s existing paid sick leave mandate, the Healthy Workplaces, Healthy Families Act of 2014, in significant ways.
• The proposed amendment increases the annual amount of California paid sick leave from three days or 24 hours, to five days or 40 hours 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 follow a frontloading setup must grant in order to avoid accrual and year-end carryover obligations.
• The proposed amendment also raises the California paid sick leave accrual cap from 48 hours to 80 hours.
• Unless Governor Gavin Newsom vetoes the bill (which is not expected), the amendment will take effect on January 1, 2024.

Overview of California’s Current Paid Sick Leave Law

California State has long been a leader in the paid sick leave space. The San Francisco local paid sick leave ordinance was the country’s first paid sick leave mandate impacting private employers at either the state or local level, and has been in effect for more than 15 years. On July 1, 2015, California became the second state (after Connecticut) to enact a statewide paid sick leave mandate – the Healthy Workplaces, Healthy Families Act of 2014.[1]

California’s paid sick leave law applies to virtually all employees who work in California for 30 or more days within a year. This includes full-time, part-time, temporary, and seasonal employees. There is a limited exemption for employees covered by a collective bargaining agreement.

To comply with the California paid sick leave law, employers can either allow employees to accrue paid sick leave or can provide an upfront grant of paid sick leave at the start of each benefit year. Under the accrual approach, employees must earn at least one hour of paid sick leave for every 30 hours that they work, up to a rolling cap of 48 hours. Under the frontloading approach, employers can provide an upfront grant of 24 hours or three days of paid sick leave in order to avoid accrual tracking and year-end carryover obligations. Under either approach, the law allows employers to set an annual usage cap of 24 hours or three days.

In addition to the California statewide paid sick leave law, a number of California localities have followed San Francisco’s lead and enacted their own paid sick leave or compensated time off laws.  These localities include Berkeley, Emeryville, Long Beach, Los Angeles (City), Oakland, San Diego, San Francisco, Santa Monica, and West Hollywood.  Each locality generally requires a more generous paid sick leave accrual cap and annual usage amount than the current statewide standards.

Impending Changes to California’s Paid Sick Leave Law

S.B. 616 proposes several key changes to California State’s existing paid sick leave law. Here are the highlights:

• Increased Annual Paid Sick Leave Usage Cap. The bill increases the annual paid sick leave usage cap from 24 hours or three days per year to 40 hours or five days per year.  The increased annual usage cap would apply whether an employer opts to accrue or frontload paid sick leave. Increasing the State’s annual usage cap to 40 hours would 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 Rolling Accrual Cap: This bill also would increase the current California rolling accrual cap (also known as “point-in-time” accrual cap and maximum accrual cap) from 48-hours or six-days to 80-hours or 10-days.
• 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. S.B. 616 continues to 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 would need to accrue at least 40 hours of paid sick leave per year.
• Increased Frontloaded Grant to Avoid Accrual and Carryover.
  • New Hires. Under the current California paid sick leave statute, employers can avoid accrual tracking with a lump grant of at least 24 hours or three days of paid sick leave for new employees to use by their 120^thcalendar day of employment. S.B. 616 maintains this standard, but adds an additional requirement for employers who want to avoid accrual of paid sick leave for new hires. Specifically, employers will need to provide new hires with no less than 40 hours or five days of paid sick leave that is available to use by their 200^thcalendar day of employment. It is not completely clear from the text of the bill whether the 24-hour allocation by day 120 and the 40-hour allocation by day 200 are inclusive or exclusive of each other.
  • Existing Employees. S.B. 616 does not change that employees have a right to carry over accrued, unused paid sick leave at year-end. However, it does increase the amount of the lump sum grant a California employer must make each year to avoid the law’s accrual and year-end carryover requirements, from at least three days or 24 hours to at least five days or 40 hours of paid sick leave granted at the beginning of each benefit year.

In sum, assuming S.B. 616 is not vetoed by Governor Newsom, employees in California will have more paid sick leave available to use on an annual basis starting in 2024.

Next Steps: Signature, Effective Date

As noted above, this law will go into effect unless Governor Newsom vetoes it, which is unlikely. Unless vetoed, the amendments will go into effect on January 1, 2024.  Stay tuned for updates in the coming weeks as Governor Newsom has until October 14, 2023 to sign or veto bills that were passed by the state legislature.

Workplace Solutions

As the paid leave landscape continues to expand, companies should reach out to their Seyfarth contact for solutions and recommendations on addressing compliance with the California sick leave law and sick leave requirements generally. To stay up to date on paid leave developments, click here to sign up for Seyfarth’s Paid Sick Leave mailing list.

 

[1] Technically, California and Massachusetts are tied as the second states with a statewide paid sick leave law as both states’ respective laws went into effect on July 1, 2015. Today, the states that have enacted a statewide general non-COVID-19 paid sick leave or paid time off mandate include: (1) Arizona; (2) California; (3) Colorado; (4) Connecticut; (5) Illinois (PTO law) (effective 1/1/2024); (6) Maine (PTO law); (7) Maryland; (8) Massachusetts; (9) Michigan; (10) Minnesota (effective 1/1/2024); (11) Nevada (PTO law); (12) New Jersey; (13) New Mexico; (14) New York; (15) Oregon; (16) Rhode Island; (17) Vermont; and (18) Washington. In addition, (19) Virginia has a statewide paid sick leave law that applies only to certain home health workers. There also are non-COVID-19 paid sick leave or paid time off mandates in (20) Washington, D.C. and more than two dozen municipalities.