Hunton Employment & Labor Perspectives

On July 13, 2015, California Governor Jerry Brown signed AB 304 amending the Healthy Workplaces, Healthy Families Act of 2014 clarifying certain terms of the law, effective immediately upon his signature.  The amendments overall make the law easier to implement and have answered many questions employers have had while preparing to meet the requirements of the original law’s effective date of July 1, 2015.  The following is a summary of the key changes to the law.

Accrual Method: The original law required, that if employers chose the accrual method as opposed to the one-time advance method, employers must provide for accrual at a rate of no less than one hour for every 30 hours worked.  AB 304 changed the law such that employers may provide for accrual at a rate other than one hour per 30 hours worked, as long as the accrual is (a) on a regular basis and (b) the employee has at least 3 days or 24 hours of accrued sick leave by the 120th calendar day of employment or each calendar year or 12-month period (as determined by the employer).

Limiting Usage: The original law allowed employers to limit an employee’s use of paid sick leave to 3 days or 24 hours in each year of employment.  AB 304 clarifies that employers may limit an employee’s use of paid sick leave to 3 days or 24 hours in (a) each year of employment, (b) each calendar year, or (c) each 12-month period (as determined by the employer).

Grandfathered Policies Before January 1, 2015: AB 304 allows employers to retain their paid sick leave or paid time off policy in effect prior to January 1, 2015 that use a different accrual method than under the law if (a) it provided for regular accrual of paid sick leave or paid time off of at least one day or 8 hours within three months of employment, each calendar year or each 12-month period, and (b) employees were eligible to earn at least 3 days or 24 hours of sick leave or paid time off within nine months of employment.  Notably, once an employer changes the accrual method in the policy, the policy must comply with the accrual method in the new sick leave law.

Eligibility Requirement: The original law provided paid sick leave to an employee who worked in California for at least 30 days within a year from the commencement of employment.  AB 304 clarifies that the 30 days worked must be for the same employer.

Notice of Sick Leave Balance: The original law required employers to provide employees with notice of their paid sick leave balance on employees’ wage statements or in another writing on pay day.  AB 304 has changed this requirement for (a) employers covered by Wage Orders 11 and 12 and (b) employers who provide unlimited sick leave.

• Motion Picture and Broadcasting Industries – AB 304 has extended the deadline for this requirement for employers covered by Wage Orders 11 and 12 (motion picture and broadcasting industries) to January 1, 2016.
• Unlimited Sick Leave – AB 304 allows employers who provide unlimited sick leave to satisfy the notice requirement by indicating “unlimited” on employees’ wage statements.

Pay Rate for Sick Leave: Under the original law, employers were to pay for sick leave based on the employee’s hourly wage rate.  However, how employees must be paid for sick leave became confusing when an employee’s hourly wage rate changed during the accrual period, the employee was paid by commission or piece rate, or for non-exempt salaried employees.  AB 304 clarified how to calculate paid sick leave as follows:

• Non-Exempt Employees – Paid sick leave must be calculated based on the employee’s (a) regular rate of pay for the workweek in which the employee uses sick leave, or (b) total wages, excluding overtime pay, divided by total hours worked in the full pay periods of the prior 90 days of employment.
• Exempt Employees – Paid sick leave must be calculated in the same manner as the employer calculates wages for other forms of paid leave.

Reinstatement of Accrued Sick Leave Upon Rehire: The original law required employers to reinstate accrued sick leave if an employee was rehired within a year of termination.  AB 304 clarifies that an employer is not required to reinstate sick leave that was paid out at termination.  Note:  The law still does not require employers to pay out unused sick leave upon termination.

Recordkeeping: The original law required employers to maintain records for three years of employees’ hours worked and paid sick leave accrued and used.  AB 304 clarifies that employers are not obligated to inquire into or maintain records of employees’ reasons for using paid sick leave.

Exemption for Certain Employees: AB 304 adds an exemption for certain retired annuitants of a public entity.  It also modifies the construction exemption by eliminating the requirement that the employee perform “onsite work.”

Employers should review their paid sick leave and other time off policies to ensure compliance with the recent amendments to the law.