Paid Sick Leave Who Gets What, Why & When?

Paid Sick Leave Who Gets What, Why & When? Atkinson, Andelson, Loya, Ruud & Romo Breakfast Briefing Series May 28, 2015 Ontario June 2, 2015 Cerritos June 4, 2015 San Diego June 5, 2015 Costa Mesa June 11, 2015 Pasadena www.aalrr.com C e r r i t o s F r e s n o I r v i n e P a s a d e n a P l e a s a n t o n R i v e r s i d e S a c r a m e n t o S a n D i e g o

Cerritos Office 12800 Center Court Drive Suite 300 Cerritos, California 90703 (562) 653-3200 Phone (562 653-3333 Fax www.aalrr.com PHILIP J. AZZARA Senior Associate pazzara@aalrr.com Employment, Business and Commercial Litigation Experience Philip Azzara represents employers in all types of employment matters, including wrongful termination, discrimination, harassment, and wage & hour claims. Mr. Azzara has extensive experience advising clients and resolving disputes pre-litigation, and litigating disputes from initial discovery through trial. Mr. Azzara has also represented clients before numerous state and federal administrative agencies and arbitrations. JONATHAN JUDGE Senior Counsel jjudge@aalrr.com Employment Law Experience Jonathan Judge is senior counsel in the Cerritos office of Atkinson, Andelson, Loya, and Ruud & Romo. He counsels employers in labor law and various employment litigation matters, including wrongful termination, discrimination, wage & hour, harassment, WARN Act, and Patient Protection and Affordable Care Act/Healthcare Reform. He represents employers before the National Labor Relations Board, Department of Fair Employment and Housing (DFEH), Equal Employment Opportunity Commission (EEOC), the California Division of Labor Standards Enforcement, and in arbitration. Mr. Judge also advises employers on personnel policies and employee handbooks. 1

Cerritos Office 12800 Center Court Drive Suite 300 Cerritos, California 90703 (562) 653-3200 Phone (562 653-3333 Fax www.aalrr.com AMBER M. SOLANO Partner asolano@aalrr.com Employment Law Experience Amber Solano represents employers in both the private and public sector in all areas of labor and employment law, including the areas of wrongful discharge, wage and hour (including class actions), discrimination/harassment, defamation, leaves of absences, privacy, and the First Amendment. Ms. Solano handles matters in state and federal courts as well as before various administrative agencies, including the Equal Employment Opportunity Commission, the California Department of Fair Employment and Housing, the Department of Labor, and the California Department of Labor Standards Enforcement. She has achieved remarkable results for clients in hearings, arbitrations, trials, and appeals. Among her recent victories is successfully defending a wage and hour case regarding travel time in the superior court. On appeal, Ms. Solano argued the case before the California Court of Appeal, and obtained a ruling in favor of her client that no wages were owed to employees. SUSAN M. STEWARD Partner ssteward@aalrr.com Employment Law Experience Susan Steward is a partner in the Cerritos office of Atkinson, Andelson, Loya, Ruud & Romo. She counsels and represents employers in all employment-related matters, including claims of discrimination, harassment, retaliation, and wrongful termination. Ms. Steward also represents employers in class action lawsuits, particularly class actions involving claims for wage and hour violations. She defends employers in both state and federal courts, and before administrative judges and agencies. Ms. Steward also drafts employment-related agreements and handbooks and conducts internal investigations for large private and public sector employers. 2

Cerritos Office 12800 Center Court Drive Suite 300 Cerritos, California 90703 (562) 653-3200 Phone (562 653-3333 Fax www.aalrr.com ROBERT L. WENZEL Senior Partner rwenzel@aalrr.com Employment Law Business and Commercial Litigation Experience Robert Wenzel is the Chief Operating Officer for the firm. He represents a diverse clientele which includes health care providers, residential construction, manufacturing concerns, restaurant and hotel, retail, food processing companies, temporary employment agencies, and service firms. He focuses on employment law and defense of management in personnel and labor relations matters such as sexual harassment, discrimination, wrongful termination, and wage and hour issues. Since joining the firm in 1983, he has represented clients in hundreds of employment litigation cases. He also advises clients in drafting contracts and agreements, and assists in general human resources matters. 3

Riverside Office 3450 Fourteenth Street Suite 420 Riverside, California 92501 (951) 683-1122 Phone (951) 683-1144 Fax www.aalrr.com WILLIAM M. BETLEY Partner wbetley@aalrr.com Employment Law Experience William Betley practices in all areas of employment law including unlawful harassment, discrimination, wrongful termination, employee classification and wage and hour. He also counsels and represents architects, engineers and subcontractors in all phases of construction planning, development, negotiation and litigation. Irvine Office 20 Pacifica, Suite 1100 Irvine, California 92618 (949) 453-4260 Phone (949) 453-4262 Fax www.aalrr.com CAROL A. GEFIS Partner cgefis@aalrr.com Employment Law Experience Carol Gefis has 25 years of experience representing and advising employers in all areas of labor and employment law, including alleged wrongful termination, discrimination, harassment, unfair competition, and wage and hour issues. Yvette N. Siegel Associate ysiegel@aalrr.com Employment Law and Litigation Yvette Siegel represents employers in various employment litigation matters, including wrongful termination, discrimination, wage & hour, and harassment. Ms. Siegel s experience includes multiple stages of the litigation process to include: drafting of briefs, motions, mediation sessions, administrative hearings, and federal court proceedings. 4

CALIFORNIA S NEW SICK LEAVE LAW EMPLOYEE RIGHTS AND EMPLOYER OBLIGATIONS The following outline discusses the basics of California s new paid sick leave law, alternative compliance rules, other (important) considerations, pending legislation, and open questions. I. THE BASICS Under the Healthy Families, Healthy Workplaces Act of 2014, sick leave must be provided to employees starting July 1, 2015. Employees may accrue sick leave at a rate of one hour for every 30 hours worked. Employers are permitted to provide more generous accrual rates, but are not permitted to impose less generous accrual rates. At the rate of one hour per 30 hours worked, a full-time employee would accrue 8.67 days or 69.33 hours of sick leave in a year. However, employers may cap accrual at six days or 48 hours per year. Employees must also be permitted to carry over up to six days or 48 hours of sick leave to the following year. However, the employer may limit use of sick leave to three days or 24 hours per year. Accrual starts from the first day of employment, but employers may limit use until the 90th day of employment with the company. January 1, 2015 marks the start of the qualifying periods that determine which employees are eligible for paid sick leave. An employee qualifies for paid sick leave by working for an employer on or after January 1, 2015, for at least 30 days within a year in California, and by satisfying a 90-day waiting period. Both the requirement that an employee work 30 days in California to be eligible for leave and the 90-day waiting period for use of accrued leave must be calculated starting January 1, 2015. Employees who meet these eligibility requirements may begin using leave as soon as leave is accrued after July 1, 2015. II. ALTERNATIVE SICK LEAVE POLICIES As an alternative to accrual, employers may choose to front-load sick leave by providing the sick leave to employees at the beginning of the year. Employers who use the front-load method for paid sick leave need not permit carryover of unused leave from year-to-year. This should be made clear in the employer s sick leave policy. As an alternative to sick time, employers may rely on Paid Time Off ( PTO ) policies to meet the requirements of the new law. The PTO must either: Satisfy the accrual, carry over, and use requirements of the new law, or Provide no less than 24 hours or three days of PTO per year on a front-loaded basis. Employers using PTO to comply with the new law must consider that PTO is treated like vacation under California law. This means PTO must be paid out upon termination, and may not be subject to use-it-or-lose-it policies. 000845.00000 13093297.1 2015 Atkinson, Andelson, Loya, Ruud & Romo 1

III. USE OF LEAVE Paid sick leave may be used for the following purposes: Diagnosis, care, or treatment of an existing health condition of, or preventive care for, an employee or an employee s family member; or An employee who is a victim of domestic violence, sexual assault, or stalking. Sick leave may be used for family members, which include the following: Child; Parent or parent-in-law; Spouse; Registered domestic partner; Grandparent; Grandchild; or Sibling. Employers must provide paid sick leave upon the oral or written request of an employee. If the need for paid sick leave is foreseeable, the employee must provide reasonable advance notification to the employer. If the need for paid sick leave is unforeseeable, the employee must provide notice of the need for the leave as soon as practicable. The new law neither defines nor provides guidance as to what constitutes reasonable advance notification and notice as soon as practicable. An employee who is exempt from overtime requirements as an administrative, executive, or professional employee under a wage order of the Industrial Welfare Commission is deemed to work 40 hours per workweek for the purposes of the paid sick leave law, unless the employee s normal workweek is less than 40 hours (in which case the employee shall accrue paid sick days based upon that normal workweek). Employers may require that leave be taken in a minimum of two-hour increments. For example, an employer may require an employee who requests to leave work one hour early to attend a doctor s appointment actually take and use two hours of accrued leave. Employers may not impose minimum use increments greater than two hours (but may set minimums less than two hours). Employers are not required to compensate employees for accrued, unused sick leave at the time of termination. However, if an employee separates from employment and is rehired by the 000845.00000 2015 Atkinson, Andelson, Loya, Ruud & Romo 2 13093297.1

employer within one year from the date of separation, previously accrued and unused sick leave time must be reinstated to the employee. In addition, employers must credit employees for the time previously worked when calculating the 90-day waiting period. For example, if an employee quits his/her employment 60 days after starting work, and is rehired six months later, the employee would need only work 30 more days to satisfy the 90-day waiting period. The law does not require that previously accrued sick leave be restored to employees who return to the employer more than one year after their employment previously terminated. However, it is unclear whether an employee returning after more than one year must re-establish the 30-day eligibility requirement and complete the 90-day waiting period before being permitted to resume use of accrued leave. The purpose of the carryover rule is to ensure employees have a bank of accrued time at the beginning of a year, and either carryover or frontloading achieve that purpose. IV. OTHER KEY COMPONENTS Revised Wage Theft Prevention Act Notice Labor Code section 2810.5 was amended to require an employer, at the time of hire, provide the employee with written notice that an employee: May accrue and use sick leave; Has a right to request and use accrued paid sick leave; May not be terminated or retaliated against for using or requesting the use of accrued paid sick leave; and Has the right to file a complaint against an employer who retaliates. For employees hired prior to January 1, 2015, employers must provide amended Labor Code section 2810.5 notices within seven calendar days after the time of the changes i.e., no later than July 8, 2015. For employees hired on or after January 1, 2015, Labor Code section 2810.5 notices containing the new information must be provided to the employees at the time of hire. Posters Employers must display a poster describing their sick leave policy starting January 1, 2015 in a conspicuous place of each workplace maintained by the employer. The poster must contain the following information: A statement that employees are entitled to accrue, request, and use paid sick days; 000845.00000 2015 Atkinson, Andelson, Loya, Ruud & Romo 3 13093297.1

Information regarding the amount of sick days provided for by [the law]; Information regarding the terms of use of paid sick days; and A statement that retaliation or discrimination against an employee who requests paid sick days or uses paid sick days, or both, is prohibited and that an employee has the right under [the law] to file a complaint with the Labor Commissioner against an employer who retaliates or discriminates against the employee. The Labor Commissioner created sample posters containing the requisite information and the posters are available to employers. The Labor Commissioner has also created two English versions and Spanish and Vietnamese language versions of the poster; however, employers are not required by the statute to utilize Spanish and Vietnamese language posters. Template posters may be obtained from the Labor Commissioner website: www.dir.ca.gov/dlse/resource.html New Reporting Requirement Employers must provide employees with written notice that sets forth the amount of sick leave available, or Paid Time Off ( PTO ) available if the employer provides PTO in lieu of sick leave, on either the employee s itemized wage statement (pay stubs) or in a separate writing provided on the designated pay date with the employee s payment of wages. New Recordkeeping Requirement Employers must keep, for at least three years, records documenting the hours worked, and paid sick time accrued and used by employees. Exceptions Only limited exceptions exist from the sick leave law: A complete exemption is available for certain construction collective bargaining agreements ( CBAs ): An employee in the construction industry covered by a valid CBA if the CBA expressly provides for the wages, hours of work, and working conditions of employees, premium wage rates for all overtime hours worked, and regular hourly pay of not less than 30 percent more than the state minimum wage rate, and the agreement either (A) was entered into before January 1, 2015, or (B) expressly waives the requirements of this article in clear and unambiguous terms. A limited exemption applies for other CBAs: An employee covered by a valid CBA if the CBA expressly provides for the wages, hours of work, and working conditions of employees, and expressly provides for paid sick days or a paid leave or paid time off policy that permits the use of sick days for those employees, final and binding arbitration of disputes concerning the application of its paid sick days provisions, premium wage rates for all overtime hours worked, and regular hourly rate of pay of not less than 30 percent more than the state minimum wage rate. 000845.00000 2015 Atkinson, Andelson, Loya, Ruud & Romo 4 13093297.1

Exemptions also exist for flight deck or cabin crew members, and for providers of in-home support services. Employees who work less than 30 days in California in a year are also ineligible for sick leave. Pay For Sick Leave Sick leave generally is paid out at the employee s hourly wage. However, special rules apply for employees paid piece rate or commission, nonexempt salaried employees, or employees who had different rates of pay in the 90 days prior to taking sick leave. In such cases, sick leave will be paid at the rate of pay calculated by dividing the employee s total wages, not including overtime pay, by the employee s total hours worked in the full pay periods of the 90 days of employment prior to taking such sick leave. The Labor Commissioner, in an April 8, 2015 webinar, provided the following examples of the above formula: Piece Rate Employee Employee was paid a piece rate of $0.36 per square foot for 16,500 square feet during 400 hours of work in a 90 day period. He earned $5,940. His hourly rate for paid sick leave is: $5,940 400 hours = $14.85 per hour. Commission Paid Employee Employee is paid on commissions only. In a 90 day period, she worked 480 hours and earned $9,000. Her hourly rate for paid sick leave is: $9000 480 hours = $18.75 per hour. V. PENDING LEGISLATION Employers will want to monitor the following bills pending before the California Legislature: AB 11, which would revise the definition of employee under the sick leave law to include providers of in-home support services. AB 304, which would clean up a number of ambiguities in the sick leave law. If passed, as currently drafted, AB 304 would: o Require that the employee work for the same employer for 30 or more days within the previous 12 months in order to qualify for accrued sick leave. o Exclude a retired annuitant of a public entity from the definition of employee. o Authorize an employer to provide for employee sick leave accrual on a basis other than one hour for each 30 hours worked, provided that the accrual is on a regular basis and the employee will have 24 hours of accrued sick leave available by the 120th calendar day of employment. 000845.00000 2015 Atkinson, Andelson, Loya, Ruud & Romo 5 13093297.1

o Permit an employer who provides unlimited sick leave to its employees to satisfy notice requirements by indicating unlimited on the employee s itemized wage statement. o Provide that if the employee receives a different hourly rate when the accrued sick leave is taken, the rate of pay would be calculated in the same manner as the regular rate of pay for purposes of overtime. o Provide that an employer is not required to reinstate accrued paid time off to an employee, rehired within one year of separation from employment, that was paid out at the time of termination, resignation, or separation. o The itemized wage statement reporting requirement will be delayed for employers covered by Wage Order 11 (Broadcasting Industry) or 12 (Motion Picture Industry) of the Industrial Welfare Commission until January 21, 2016. o Provides that an employer is not obligated to inquire into or record the purposes for which an employee uses paid leave or paid time off. AB 304 is not an Urgency bill, so it won t be effective until January 1, 2016. VI. SB 579, which would require employers to permit employees to use paid sick leave to address a childcare or school emergency (in addition to other allowable uses). OPEN QUESTIONS If an employer uses the front-load method, may the employer still require the employee complete the 90-day waiting period before allowing the employee to use the leave? Can I require an employee provide a health care provider s note to substantiate use of sick leave or before paying sick leave? How many hours must employers provide to employees who do not work standard eight-hour days, such as those on part-time or alternative workweek schedules? Does a sick leave policy that provides one (1) day of sick leave per month comply? How do you handle seasonal employees or re-hires? If I provide sick leave in the first part of 2015, does that satisfy or offset the obligation to provide sick leave starting on July 1, 2015? Does the 90 day waiting period have to be continuous? If an employee starts working, works for a week and comes back to work four months later, is the employee allowed to use sick leave (under a front-load method)? Is the year a calendar year (January to December) or anniversary year? 000845.00000 2015 Atkinson, Andelson, Loya, Ruud & Romo 6 13093297.1

How does the law work in conjunction with the San Francisco or Oakland sick leave ordinances? With current employees who will be provided sick time as of July 1, can we still have a waiting period of 90 days, even though they have worked for us for more than 90 days already? What if an employee only works 120 hours in a year, would they only accrue four hours? Can full-time employees be on an accrual method policy and part-time employees be on front load policy (i.e. can you have different policies for different groups of employees)? What if any employee calls in sick when the employee is not scheduled to work, does sick leave need to be paid? This AALRR presentation is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR presentation/publication does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process. 000845.00000 2015 Atkinson, Andelson, Loya, Ruud & Romo 7 13093297.1