Episode 190: What Employers Should Know About California’s Latest Paid Sick Leave Expansion

Welcome to the Workplace, a podcast by Cal Chamber. I'm Matthew Roberts, the Associate General Counsel of Labor and Employment with the California Chamber of Commerce. Hello, listeners. Well, the people have spoken and we have a clear winner for the new 2024 law that is causing the most headaches. That is SB616, otherwise known as the expansion of the Healthy Workplaces Healthy Families Act. That is California's mandatory paid sick leave law that has been in effect since 2015. As a quick refresher for everybody, California law generally requires employers of all sizes to provide paid sick leave to all of its employees. And prior to January 1st of this year, the requirement was generally understood that we had to provide annually at least 24 hours or three work days, whichever was greater based upon the employee's usual workday. SB616, amongst other things, increased that amount to what is generally now known as five days or 40 hours, again, whichever is greater. While the actual changes to the law appeared relatively straightforward in practice, implementing the changes has proven far more difficult as employers have put fresh eyes on the law for the first time in years and find some of the language very confusing. Raising the stakes is a 2023 California Court of Appeal case that now allows employees to bring private Attorneys General act claims for violations of psl, and in essence, now allowing class action like claims for PSL violations. So to help us wade through the mud of this new law, we welcome back Ellen Savage, one of Cal Chamber's excellent employment law experts on the Cal Chamber Labor Law Helpline. Thank you so much for joining me.

Today, Ellen, as always, Matt, glad to be here. Although honestly, I did think about calling out sick. No.

Well, you know what? It's January 1st and you have a new allotment of paid sick leave days, Ellen. So by all means, use them as you need them.

You bet.

So, as I mentioned at the outset, there is this general requirement now to provide five days or 40 hours annually. That's kind of how it's phrased. However, there are various ways that the employees actually earn the time, depending upon which method the employers choose. I think a good way to kind of ease into this show to start is with that, Ellen, how can employers actually provide the paid sick leave?

Well, let me start by saying that despite all of the hoopla and confusion over the new law, the three main methods that California employs can choose from to provide their sick leave aren't any different than they've been for the last eight years. It's just mostly now that the number of sick days that need to be provided have been pumped up under this new law. So there's three main ways employers can provide paid sick leave here in California. And just to make things fun, each of those methods has two different names. They're known by, you know, in case there's not enough confusion on this topic. So there's method one that we call the lump sum, or upfront method. Method two is the 1, 4, 3 0, or statutory accrual method. And then method three is the regular or alternative accrual method. So for our purposes, let's try to stick with the terms lump sum, one for 30 and regular. Okay, so starting with the lump sum method, under the lump sum method, your employer just dumps the full amount of sick leave into your bank right away, 40 hours or five days. Under this new law, now you have to wait 90 days to use it, and then it's yours to just use throughout the whole year. At the end of the year, under this method, it's a use it or lose it. Your employer just takes away whatever you haven't used and they dump a new bank in. It's kind of like when you were a kid, if your parents gave you allowance on Sunday morning, here's your five bucks, spend it however you want. Only in this case, under this blah, blah, a week later, on Saturday night, your folks get to take away whatever you didn't spend. That's the use it or lose it part of the lump sum method. So at the end of the week, of course, as a kid, you're spending every last dime buying bubblegum and Pokemon cards, whatever you can find. So with the lump sum method, we do find everyone calls out sick the last week of December before they lose their sick leave. Now, the nice thing with this method, there's no caps, there's no accrual, there's no carryover. Mostly easy peasy, super easy for employees employees to understand.

Then there's the second method. That's the one we call the one for 30 method. Under this method, employees accrue their sick leave as they work at a rate just like the name implies, one hour for every 30 hours that they work. There's a cap on the accrual under this method of 80 hours or 10 days. Now, that's a bump up from last year. And as an employer, you can cap the employee's use of sick leave every year at 40 hours. So here, going back to the allowance, instead of your parents giving you all your allowance up front on Sunday night, let's imagine they're giving you a dollar for every 30 math homework problems, you finish, and again, under this method, you have to wait 90 days to use it. And after that you can use whatever sick leave you've earned so far. And you keep getting one more hour for every 30 hours you work. There is an accrual cap under this method. And all that means is whenever your bank gets to 80 hours or 10 days, you stop accruing. No more sick leave goes into that bank until you use some. So that's like doing more math homework problems, but no more allowance for doing them. The law also says you can only use 40 hours or five days each year. So even if there's still some sitting in your bank, it's kind of like your parents telling you you can only spend $40 of your allowance even if you've ear and you have to keep the rest in a savings bank for the next year. Third method, method number three, the alternate or regular accrual method. Again, we're going to call this the regular accrual method. With this one, the legislature said, hey, if you don't want to use that first lump sum method and you don't want to do a 1 for 30 method, you know, if you don't want to be counting hours, that's cool. You can do any regular accrual amount throughout the year as long as you make sure, and this one is important under this method, that your employees get a certain amount of sick leave within certain time limits. So Instead of giving one hour for every 30 hours worked, you might choose to do X amount per pay period or Y amount per week. So that would be like your parents giving you $2 of allowance every week no matter how many math problems you actually do. But under this method and this method only, you have to make sure you're giving enough sick leave on a regular basis to guarantee that your employees will get 24 hours of sick leave by their 120th day of employment each year and at least 40 hours by the 200th day. Last but not least, there's another method we call the grandfather plan. If you're using it, talk to your legal counsel, because it's gotten a little trickier this year.

Yeah. And I think, Ellen, those are fantastic analogies to kind of how to understand the three major ways that you provide paid sick leave. And that actually kicked off our first level of confusion that we've been seeing both on the helpline and at our employment law update seminars is this idea that if you do either accrual method 1 for 30 or regular accrual, that you have to Meet those benchmark days 24 hours by 120 days, 40 hours by 200. But that's not true, right? If you use the one for 30, we don't have to worry about those days.

That's correct. And I think this has caused more confusion than almost anything else right now under this new law. What I want to say is, and if I could shout it out in capital letters over this podcast, I absolutely would.

We'll do it in the write up, Ellen. We'll put capital letters in this one.

Remember that the 1 for 30 method does not require meeting any of those benchmarks. So if you choose the 1 for 30 method, you just put those dreaded 120 day and 200 day rules right out of your head. They don't apply to you. For the 1 for 30 method, the employer plunks one hour of sick leave into your bank for every 30 hours you work, period. Full stop. No 120 day rule, no 200 day rule. That's it.

Okay, Alan, but what about our part time employees? So if we use the one for 30, some of our part time employees may not ever get to 40 hours in the year. Some things that we're hearing about that means that we have to add additional time because they're not getting to the 40 hours. What are your thoughts about that?

Well, my thoughts are that maybe actually this question has caused more confusion than your last one. Maybe I was wrong about that. So under the 1 for 30 method in the statute, there is literally no requirement at all that an employee ever reach 40 hours or five days in their bank. I know every article you read, even the labor Commissioner's posterior sort of seems to say that. But if you look at the statute, there is no such requirement. Let me give you an example. If I work for you, Matt, one hour each week, that's it. I just work one hour a week. It's going to take me 30 weeks to accrue an hour of sick leave under the 1 for 30 method. And guess what? I'm going to have less than two hours of sick leave over the course of a whole year. And that is just fine under this law. And think about it, it totally makes sense. If I work one hour a week and I'm guaranteed 40 hours of sick leave, I only have to work 12 days a year and I get paid for the whole year. I can call out sick 40 times.

So there is no requirement that Everybody get to 40 hours or 5 days. If you use the 1 for 30 method, if you use the lump sum method, Yep. You gotta guarantee 40 hours or five days. If you use the regular accrual method, you gotta guarantee it. But the one for 30, you do not have to.

Excellent. So then moving on to this lump sum, this upfront method that you're talking about, as well as those caps, because you had mentioned some accrual caps and you mentioned some usage caps, SB616 wasn't passed in a vacuum. That is, we've had these caps and these rules in place before. And part of the provision of the paid sick leave law is that the employer gets to decide this 12 month period in which we provide the sick leave time. Right. In which the caps work, in which when we have to provide the upfront time. And some of those employers have chosen anniversary of hire. So several questions that I know you and I have addressed, especially early on back in October and November, revolved around how does this change impact employers who utilize some 12 month period other than January 1st? For example, if I get all my lump sum time in July each year, what happened on January 1st of this year that I had to do with my lump sum employees?

So yeah, Matt, that really raised an important question. When the law was passed, a lot of employers who use that easy lump sum method, I.e. hand me all my allowance up front on Sunday night kind of method, they do it on an anniversary basis. So if I'm hired on July 1, then every year on July 1, I get my lump sum, which has always been 24 hours. So when the sick leave law bumped up from three days to five days, we all kind of scratched our head and said, all right, so what are these employers who do anniversary date supposed to do on January 1st when the law goes to five days? So the labor Commissioner kept us all in suspense for a little while and then she finally issued an FAQ that says, look, you got two options here. First option, give everyone two extra days or 16 hours on January 1st of this year, 2024, and stick with your normal anniversary date reload going forward. Meaning that when July 1st rolls around, you take away whatever I haven't used in my bank because of course lump sum is to use it or lose it. And now you give me five days on July 1st and you're going to just stick with your anniversary date. Now this also means, and follow me here because it's a little confusing in this part. If you had the 3 day or 24 hour usage cap in place under the old law, and I'd used up all my three days in 2023 that I was given on July 1, in your example, you're going to have to let me use two more days because now the usage cap is 5, not 3. So that's going to be a little twist you need to pay attention to. The labor commissioner also said if you don't want to do any of that, I'm going to give you basically a one time opportunity. Move everyone from anniversary to January 1st, reset, wipe out everyone's bank as of New Year's Eve 20, 23, plunk five days in their bank, January 1st. Moving forward, be a January 1st anniversary or January 1st reload employer.

Wonderful. Okay, so this has started to create some policy concerns for employers. That is they look at way that they're offering their paid sick leave now, whether it's 1 for 30 or front loading, and they're deciding one or the other doesn't work for them anymore. So some employers are looking to change the method by which they provide the sick leave either from upfront to 1 for 30 or regular accrual or vice versa, from one of the accrual methods to the upfront methods in general. Can an employer swap their plan?

Well, it's kind of a fun question, at least from a labor law wonky point of view, because there's nothing in the sick leave law that prevents us from changing from one method to the other. But there's also nothing in the law that tells us how to do it. No case law so far, nothing from the labor commissioner. So if you're going to change your plan from one method to another, I'm always going to tell you, talk to your legal counselor who can look over your specific current plan. There's all kinds of plans out there and advise you on how to do it. But what I can say is if you're going to change methods, you don't want to be the next big lawsuit that we get to write about on HR California or talk about in a seminar. So you want to make sure that nobody loses out on any benefit they would have been entitled to. Don't take away anything that could be in violation of the law. And that might mean that this year you're going to have some added expense for your sick leave as you transition over.

Yeah. And I think to put that in real specific terms for people that I even talked about actually yesterday in an employment law update was, well, what if we go from upfront to 1 for 30 because we think 40 hours up front is now just too much every year, but they have 24 hours left over in their bank. Can we just wipe it out because we were doing that upfront and as you said, you just wipe it out when you're doing upfront. But now we're changing to an accrual method. So Ellen, you're saying here that you probably really want to strongly consider just carrying over that time, even if maybe you don't have to because you don't want to run that risk, is that right?

Exactly. Because now I should have gotten a lump sum of five days on January 1st, so if I got sick in January I could cover it. But instead you're telling me I now have to accrue starting from zero, which means I've got nothing in my bank. And I think that the argument could be made that that's very risky.

Excellent. Okay, so what if instead we don't want to change the plan for everybody, but we want to do different plans for different employees? Because you've given us some thoughts here with part time employees. Maybe we want to go to a 1 for 30. So can we have front loading for our full time employees? Can we have one for 30 for our part time employees in the same workforce? Or maybe we base it by divers departments. It's better to provide upfront for one department and one for 30 for another department like warehousing versus administrative. What are your thoughts there on having different plans for the same workforce?

I think it's absolutely fine to do. There is nothing in the healthy workplace, healthy families law that says you have to use the same method for all your employees. In other words, you know, parents can decide one group of kids gets their allowance up front and other employees have to do their 30 math problems to earn it. Using my previous example, I do talk to a lot of employers who do use lump sum for full time employees and then the 1 for 30 method for their part time employees. Problem is, this can raise some confusing issues. If you've got a full time employee who goes to part time or versus vice versa, how do you switch them from one method to another? Just what we were just talking about. So you're going to have to think about how you're going to handle that. It's fine to use different methods for different departments. Just like you said, warehouse gets 1 for 30, admin employees get a regular accrual rate. Again, what do you do if a warehouse employee switches over to the admin department? So long answer short. As long as everyone gets at least the minimum requirements of one of those three methods, you could use more than one method and it's not uncommon.

Okay, so then Ellen, we decide we're going to change. We're going to do something to change here.

And we know changes are going to have to be made anyway because our accrual caps are going to have to go up. Our usage caps are going to have to go up. Our front loading amounts are going to have to go up. Any way we do this, we're making changes. Ellen, is there a required notice employers have to provide to their employees, either under the law or just practically as an employer that we need to provide to our employees?

Of course there are notice requirements, Matt. You know, California would never miss out on opportunity, opportunity to create a poster for something. And indeed, there is an updated sick leave poster that needs to go up. That's of course part of the Cal Chambers big poster set for 2024.

In addition to the poster, there's Labor Code section 2810.5 notices. Those are also known as wage and employment notices. They're also known as wage theft notices. Again, a thing with way too many names. But under Labor Code section 2810.5, if the employer changed their sick leave plan in any way, then that notice should have gone to all non exempt employees within seven days of the new law taking effect on January 1st. Now, that's only if the employer increased their sick leave, increased their caps, all of that in compliance with the law. Some employers may already have been generous or may be complying with a local ordinance. And so maybe they didn't need to change anything. And if that's the case, then maybe they did not need to issue a new 2810.5 notice. In addition to that, of course, you're going to want to update your sick leave policies in your handbook and make sure to provide those changes to your employees and an acknowledgement as soon as you can.

All right, great advice, Ellen. And we certainly cannot conclude a podcast about California paid sick leave without discussing one of the ever hot topics doctor's notes. So Ellen, what's the state of affairs with regards to doctor's notes and psl? I mean, after all, now they're getting more time. Surely we can start asking for doctor's notes, right, Ellen?

Surely we cannot in general, Matt. Unfortunately, in general, the state of affairs of doctor's notes, as you put it, Matt, is no doctor's notes when an employee is using protected California sick leave. This sick leave law is mostly an honor system. Once my protected sick leave is used up, and if employees are still calling in sick with a cold or a flu or whatever, go ahead and use whatever doctor's note policy you want, but not for the days an employee is using protected California sick leave. Now, what about totally clear cases of abuse? The labor commissioner did recently issue an FAQ that says, okay, maybe you can ask for documentation if you have information indicating that the employee is not using the paid sick leave for a valid purpose. So let's say your employee says, hey, next week I want to go on vacation to Hawaii. And you say, hey, things are too busy, you can't go. And the next week, guess what the employee does? Calls out sick all week, but they're dumb enough to post pictures of themselves on Facebook surfing Waikiki. Yeah, Matt, then we're gonna ask for a doctor's note. Otherwise, not so much.

Excellent. Well, it's never fun to wade through the mud alone. So, Ellen, thank you for wading through the mud with me on these paid sick leave updates. I do really think this was truly enlightening for everybody and hopefully it's helpful getting everybody up to speed and getting their policies ready to go for compliance going forward. So, Ellen, thank you again for joining us.

Absolutely Happy to be here, Matt.

And thank you listeners for joining this discussion on the workplace. As always, please comment, share and subscribe to Cal Chamber's podcast by visiting calcham.