On September 10, 2014, Governor Jerry Brown signed into law AB 1522, known as the “Healthy Workplaces, Healthy Families Act of 2014.” This bill requires California employers, large and small, to provide paid sick leave for their employees. California and Connecticut are the only states in the country thus far to mandate paid sick leave. The law goes into effect on July 1, 2015.

Coverage: Unlike certain other employment laws that are limited to larger employers, there is no minimum number of employees required to trigger coverage under AB 1522. The law broadly extends paid sick leave to most employees, with limited exceptions for certain employees covered by collective bargaining agreements, to providers of in-home supportive services, and to certain employees of air carriers. The exclusion for employees covered by collective bargaining agreements applies if the agreement expressly provides for the wages, hours of work, and working conditions of employees, and expressly provides for 1) paid sick days or a paid leave or paid time off policy that permits the use of sick days for those employees; 2) final and binding arbitration of disputes concerning the application of its paid sick days provisions; 3) premium wage rates for all overtime hours worked; and 4) regular hourly rate of pay of not less than 30% more than the state minimum wage rate. A separate exclusion also applies to employees in the construction industry covered by a collective bargaining agreement if the agreement includes specified provisions and was entered into before January 1, 2015 or expressly waives the requirements of AB 1522.

Key Provisions of Paid Sick Leave Law

Accrual: Commencing July 1, 2015, most California employees will be entitled to accrue paid sick days at the rate of not less than one hour per every 30 hours worked, beginning at the commencement of employment. In order to qualify for paid sick leave, the employee must be employed for at least 30 days within the one year period following the commencement of employment. Exempt employees are deemed to work 40 hours per week for accrual purposes, unless their normal workweek schedule is less than 40 hours, in which case they would accrue paid sick leave based upon their normal workweek. Paid sick days continue to accrue from year to year, and carry over from one calendar year to the next. An employer may, however, cap accruals at 48 hours (or 6 days) of paid sick leave.

Use: The employer must allow the employee to use accrued paid sick leave, upon the oral or written request of the employee: 1) for the diagnosis, care, or treatment of an existing health condition of, or preventive care for, the employee or the employee’s family member; or (2) for an employee who is a victim of domestic violence, sexual assault, or stalking as defined under California Labor Code sections 230 and 230.1. “Family member” means the employee’s child, parent, spouse, registered domestic partner, grandparent, grandchild, or sibling.

Employees are entitled to use accrued paid sick days beginning on the 90th day of employment. The employer may limit an employee’s use of paid sick days to 24 hours (or three days) in each year of employment. Employees may use accrued paid sick days in partial-day increments. The employer may, however, set a reasonable minimum increment not to exceed two hours.

If the need for paid sick leave is foreseeable, the employee must provide reasonable advance notice. If the need for paid sick leave is unforeseeable, the employee must provide notice as soon as practicable. The employer may not require the employee to search for or find a replacement worker to cover the days during which the employee uses paid sick days.

Payment: Paid sick leave must be paid at the employee’s hourly wage rate. If the employee is paid by commission or piece rate, or is a nonexempt salaried employee, then the pay rate is calculated by dividing the employee’s total wages (not including overtime pay), by the employee’s total hours worked during the 90 day period before taking accrued sick leave. Payment for sick leave must be provided no later than the payday for the next regular payroll period after the sick leave was taken. Employers are not required to pay employees for accrued, unused paid sick days upon termination or other separation from employment. However, if a former employee is rehired within one year from the date of separation, previously accrued and unused paid sick days must be reinstated.

Notice: Employers must provide employees with written notice setting forth the amount of paid sick leave available (or paid time off provided in lieu of sick leave). This notice may be included 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. AB 1522 also amends California Labor section 2810.5, which since 2012 has required employers to provide newly hired employees with written information regarding wages and other matters. Under AB 1522, this written notice to new employees must also include language advising them of their right to accrue and use paid sick leave and to be free from retaliation for exercising that right.

Existing Paid Leave Policies: An employer is not required to provide additional paid sick days under AB 1522 if it has a paid leave policy or paid time off policy which makes available an amount of leave that may be used for the same purposes and under the same conditions as specified by AB 1522, and if the policy does either of the following: (1) satisfies the accrual, carry over, and use requirements of AB 1522, or (2) provides at least 24 hours (or three days) of paid sick leave (or equivalent paid time off) for employee use for each year of employment or calendar year. Thus, if the employer’s policy gives employees at least three days of paid sick leave at the beginning of each year, no accrual or carry-over is required.

No Retaliation: AB 1522 prohibits employers from denying an employee the right to use accrued sick days, or from taking adverse employment action against the employee for 1) using accrued sick days, 2) attempting to exercise the right to use accrued sick days, or 3) engaging in other specified protected activity. The bill provides for a “rebuttable presumption” of alleged retaliation where the alleged retaliatory conduct occurs within 30 days of the specified protected activity.

Penalties: Where paid sick leave is unlawfully withheld, the employee is entitled to recover the dollar amount of paid sick days multiplied by three, or $250, whichever is greater, but not to exceed an aggregate penalty of $4,000 per employee. Additional penalties apply where violations result in discharge or other harm to the employee, and/or where the Labor Commissioner initiates an enforcement action to secure compliance.

Record-Keeping and Posting: AB 1522 requires employers to retain for a minimum of three years records documenting the hours worked, paid sick days accrued, and paid sick days used by each employee. If the employer fails to maintain adequate records, it shall be presumed that the employee is entitled to the maximum number of paid sick hours accruable, unless the employer proves otherwise by clear and convincing evidence. Employers also will be required to display in a conspicuous place in each of its workplaces a poster notifying employees of their paid sick leave rights. The Labor Commissioner will be responsible for preparing this poster. Employers that willfully violate the posting requirements will be subject to a civil penalty of up to $100 per offense.

Other New California Legislation

Minimum Wage: In other legislative developments, effective July 1, 2014, California’s minimum wage will increase from $8.00 to $9.00 per hour. After July 1, 2014, the minimum monthly salary to preserve exempt status under California Labor Code § 515 will rise to $3,120 per month (currently $2773.33).

Paid Family Leave Insurance: In addition, effective July 1, 2014, coverage under the California Paid Family Leave (PFL) insurance program has now been expanded to also include care for siblings, grandparents, grandchildren, and parents-in-law. In 2002, California became the first state to enact a PFL insurance program through an expansion of the State Disability Insurance system. PFL provides up to six weeks of partial wage replacement to workers who must take time off work to care for a seriously ill family member or bond with a new child. This law does not create any new family care leave entitlement under the California Family Rights Act. Prior to the July 1, 2014 amendment, the PFL law allowed workers to receive benefits while caring for a seriously ill child, parent, spouse or registered domestic partner but not siblings, grandchildren or parents-in-law.

Rest and Recovery Periods: Finally, California Labor Code section 226.7 precludes employers from requiring employees to work during any meal, rest, or recovery period required by law, and to pay an additional hour of pay at the employee’s regular rate of pay for each workday a meal, rest, or recovery period is missed. In order to resolve ongoing questions as to whether rest or recovery periods needed to be paid, a new amendment to section 226.7 specifies that rest or recovery periods required under state law shall be counted as hours worked, for which there shall be no deduction from wages. Because the amendment is declarative of existing law, it took effect immediately upon passage, and applies retroactively.

For additional information about these developments, please contact any member of Schiff Hardin’s Labor and Employment Group.