The New California Sick Pay Law: How To Comply and The Consequences of Not Complying

November 7, 2014
Paul K. Schrieffer
P. K. SCHRIEFFER LLP

Re: The Healthy Workplaces, Healthy Families Act of 2014 (Cal. Labor Code section 245 et seq.).

Enactment date: September 10, 2014 (Brown signed the law on this date). The law will apply to all employers starting on July 1, 2015

Dear Clients and Colleagues,

This act mandates at least three days of sick pay for all employees, exempt or non-exempt. The law applies to all employers no matter the number of employees. Whether an employer has one employee or 1,000 employees, the sick pay law will apply.

Accrual of Sick Pay:

• Employees earn at least 24 hours of sick pay each year. Accrual will be one hour for every 30 hours worked.

• Probation period for employees has become more important: The sick pay will not begin to accrue until the 90th day of employment.

• Employees must work 30 or more days in CA within a year. This means employers with offices in other States must be more careful how it utilizes non-CA employees in CA.

• Exempt employees and sick pay law: Presumption of 40 hour workweek unless employer proves employee works less than a 40 hour week. If employer proves this, then exempt employee will accrue similar to a non-exempt or hourly employee.

• There is no carry over accrual, unlike “vacation pay.” Thus, one may “use the sick pay or lose it” at the end of each year. The employer also does not have to pay for unused sick pay at termination.

• One potential wrinkle for employers: The employer must reinstate unused sick days if the employee is rehired within one year of the termination.

• If an employer already provides at least three days sick pay for all employees, this act will not add new requirements unless the employer does not provide sick pay for more than 90 days from the start or something unusual or if the employer did not have the policy to reinstate accrued sick pay if the employee is rehired within a year after termination.

• Overtime: The good news for employers is if a person receives sick pay, that sick pay is not counted into the overtime. This is similar to holiday pay and vacation pay. The general rule is one receives overtime for hours actually worked.

Qualifying reasons for using sick pay:

An employee may make an oral or written request for the sick pay based upon:

1. the employee’s own diagnosis, care, or treatment of an existing health condition, or preventative care;

2. employee family member’s diagnosis, care or treatment of an existing health condition, or preventative care;

3. if the employee is a victim of domestic violence, sexual assault or stalking.

Notice and Posting of Sick Pay Provisions, and Failure to Comply with the New Sick Pay Law:

• Employers have to provide written notice to employees and state the amount of sick leave accrued on the wage statement or a separate document on the date wages are paid. The employer will have to now keep track of this as part of the business payroll records of each employee, again non-exempt and exempt.

• A poster will also be required to be placed at the workplace, which poster the CA Department of Labor is preparing in anticipation of the July 15, 2015 date when the law takes effect.

• The failure to comply will result in penalties under the law, but the Legislature did not include the new law into the general wage statement law of California Labor Code section 226, which carries its own penalties and attorneys’ fees recoveries. Liable employers are also responsible for attorney’s fees, costs, and interest if the Labor Commissioner or the Attorney General sues the employer. Penalties are the greater of the dollar value of the number of paid sick days withheld from the employee times three, or $250, not to exceed $4,000. If the violation results in harm to the employee, then a $50 per day additional penalty applies, up to $4,000. Willful violations for violating poster requirement: $100 per offense penalty. Only employers who prove they made an “isolated and unintentional payroll error or written notice error that is clerical or inadvertent” are not liable for a penalty or liquidated damages assessments.

• Also, the Wage Theft Law (Cal. Labor Code section 2810.5) is now amended to include Cal. Labor Code section 245 et seq. so that employees have to now be told at the time of hire that they have the right to accrue and use sick leave, have a right to request paid sick leave and may not be retaliated against for exercising those rights to request and to use paid sick leave–and may file a complaint in the courts or before the Labor Commissioner against the employer. Worse for the employer, the employer may face a discrimination claim if the approvals or disapprovals of sick pay are seen as retaliatory or unfair.

• One very important aspect of this law is that it creates a rebuttable presumption against the employer if an adverse employment action is taken against an employee within 30 days of an employee filing a complaint, cooperating in an investigation or opposing a practice prohibited under the Act. This is also true if the employee is complaining about the employer’s violation of the law concerning another employee. This is consistent with other California law on the subject.

Does Employer have a Collective Bargaining Agreement with a Union? If So, the Law Will Not Likely Apply:

If there is a collective bargaining agreement that provides for payment of wages, hours, etc. and it provides for 30% or more than the minimum wage, pays sick or similar leave, and has a final and binding arbitration for disputes, the law will NOT apply to that employer.

Other Exemptions From the New Sick Pay Law:

• In home service workers;

• Construction employees covered by collective bargaining agreements;

• Certain air carrier and flight workers.

CONCLUSION:

Most employers provide sick pay to non-exempt employees. However, there will be some material changes for employers in terms of labor law compliance. Starting on July 1, 2015, the new law will require employers:

1. to keep track of paid sick day accrual for exempt employees;

2. to ensure the new right to paid sick days is made known to the employees at the time of hire, in the workplace poster, and in wage statements;

3. to ensure that if an employee is rehired within a year of termination, the last existing accrued sick days are the starting point for the sick day accrual (though the first 90 day exemption may also apply again);

4. to evaluate any adverse employment action against the employee who utilizes or even requests sick days and ensure there is no retaliation, discrimination or other improper motivation relating to the utilization or request for sick days. There will be two issues to continually review: the right of the employee to request the paid sick time and the utilization of that sick time. The new law’s presumption against the employer for adverse employment actions in the 30-day window is a potentially monetarily significant compliance requirement.