California Expands Paid Sick Leave to Five Days Per Year

THE LAW

The HWHFA covers all employees who work at least 30 days in California for an employer and applies to all employers with at least one covered employee. It generally provides that any covered employee may take paid sick leave for permitted purposes, including a medical need (for themselves, a covered family member or a designated person) or for purposes related to domestic violence, sexual assault or stalking.

The law also sets out additional requirements related to paid sick leave. For example, employees must provide reasonable advance notice of the need to take paid sick leave, unless the need is unforeseeable, and generally, employers are not permitted to require documentation verifying the need for leave. In addition, employers have various posting and notice obligations as well as the obligation to reinstate accrued and unused paid sick leave for employees who have been rehired within one year from the date of separation.

While SB 616 leaves these aspects of the HWHFA unchanged—for instance, employers do not have an obligation to pay out unused paid sick leave at termination—it does make many crucial changes:

*Note, this chart identifies key components of the California law, but it does not consider requirements of various local jurisdictions, which may differ.

• Extended Protection to CBA-covered Employees: SB 616 extends some HWHFA protections to union employees covered by collective bargaining agreements (CBAs). Namely, CBA-covered employees must now be allowed to take paid sick leave for HWHFA-covered reasons, cannot be required to find a replacement for the days they take their leave and cannot be retaliated or discriminated against for doing so.
• Preemption: SB 616 seeks to establish greater uniformity between state and local paid sick leave laws, and it thus explicitly preempts local ordinances that are contrary to the HWHFA with respect to the following issues:
  • Rate of Pay: Employers must calculate paid sick time for nonexempt employees in one of the following three ways:
    1. In the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time, whether or not the employee actually works overtime in that workweek;
    2. By 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; or
    3. In the same manner as the employer calculates wages for other forms of paid leave.
  • Timing of Pay: Employers must provide payment for sick leave taken by an employee no later than the payday for the next regular payroll period after the sick leave was taken.
  • Written Notice: Employers must provide employees with written notice that sets forth the amount of paid sick leave available, or paid time off that the employer provides in lieu of sick leave, for use on either the employee’s itemized wage statement or in a separate writing provided on the designated pay date with the employee’s payment of wages. If an employer provides unlimited paid sick leave or unlimited paid time off to an employee, the employer may satisfy this section by indicating “unlimited” on the notice or the employee’s itemized wage statement.
  • Advance Leave: Employers may lend paid sick days to an employee in advance of accrual at the employer’s discretion and with proper documentation.
  • Advance Notice: Employees must provide reasonable advance notification of their need to take paid sick leave if the need is foreseeable. If the need for paid sick leave is unforeseeable, the employee need only provide notice “as soon as practicable.”
  • Rehiring: Employers are not required to pay out accrued, unused sick leave upon an employee’s termination. If an employee separates from an employer and is rehired by the same employer within one year from the date of separation, their previously accrued and unused paid sick days must be reinstated. However, reinstatement is not required if the employer paid out the employee’s accrued, unused paid sick time at separation.

PENALTIES FOR NONCOMPLIANCE WITH THE NEW REQUIREMENTS OF SB 616

The HWHFA does not directly permit a private right of action by an aggrieved employee; it expressly limits remedies to equitable, injunctive or restitutionary relief.

However, the California Court of Appeal Fourth Appellate District recently ruled in April 2023 that employees can enforce the HWHFA through a Private Attorneys General Act action. While the Fourth District’s decision stands apart from other federal and state court decisions, employers should expect further litigation on this issue and take care to comply closely with SB 616.

Also, employers should note that the penalties for violating the written notice requirement described above would be imposed in lieu of penalties for a violation of California Labor Code Section 226, which requires itemized wage statements.

SB 616’S UNSETTLED QUESTIONS

• Safe Harbor Provision: Currently, there is no safe harbor provision or “ramp up” period for employers to plan and effectuate new policies and procedures that comply with SB 616. We advise that employers prepare for compliance as soon as possible.
• Timing of Verification Documentation: Since the California labor commissioner’s interpretation of the HWHFA prevents employers from requiring documentation to substantiate an employee’s need to take paid sick leave, most employers have implemented a practice of requiring a doctor’s note only after the third day of leave. With SB 616, employers may now need to wait until after the fifth day of an employee’s paid sick leave to ask for any kind of substantiation.

PRACTICAL CONSIDERATIONS AND NEXT STEPS

As employers prepare for compliance and implementation of these new requirements, they should consider the following:

• Employers with combined PTO policies (i.e., that combine sick leave, vacation and other types of leave into one “bucket”) should consider reviewing and updating policies as necessary to confirm that they continue to meet the new minimum California requirements for paid sick leave.
• Employers should coordinate with their payroll providers to confirm that their payroll and wage statements will be adjusted to meet the new requirements.
• Employers with CBA-covered employees should consult with labor counsel and take special care in reviewing applicable CBAs and their policies and procedures, specifically to ensure that unionized employees can take paid sick leave for qualifying reasons.
• Because SB 616 partially preempts local ordinances, employers should also review any local paid sick leave ordinances that may apply to their workforce based on the city and county they operate in.

For assistance with SB 616 and HWHFA compliance and implementation, please contact McDermott’s Employment Practice Group.