February 11, 2020

Paid Sick Leave Updates in the Garden State and City of Chicago

Final regulations were issued affecting the earned sick leave law in New Jersey.  In addition, the City of Chicago’s paid sick leave ordinance has been amended.  Following is a summary of these changes.

New Jersey’s Earned Sick Leave: Final Regulations

In May 2018, New Jersey passed an earned sick leave law which took effect October 29, 2018.  More than a year later, in January 2020, final regulations were issued interpreting the Earned Sick Leave law.  The regulations parallel proposed regulations issued September 18, 2018.  For background about this law, see our prior Benefit Beat articles from October and May, 2018).  Of particular note, the final regulations provide guidance for accrual or frontloading sick leave, establishing a benefit year, and an employer’s paid time off policy. 

As a reminder, the Earned Sick Leave law requires virtually all employers to allow employees to accrue one hour of leave for each 30 hours worked, up to a maximum of 40 hours in a benefit year.  The law allows either frontloading or accrual.  According to final regulations, in no event can the employer impose a use it or lose it scenario. 

If the employer’s policy uses the accrual method, the employer may offer to payout unused sick leave. The employee has 10 calendar days from the date the offer was made to accept or reject the offer. The employee can take either a full payout or a 50% payout of the unused sick leave. If the employee rejects the payout entirely or takes a 50% payout, the employee may carry-over any unused sick leave to the next benefit year subject to the 40 hour limit.

If the employer’s policy provides for frontloading, the employer must either provide the employee a payout for the full amount of unused sick leave or permit the employee to carry-over any unused sick leave to the next benefit year subject to the 40 hour limit. If the employer pays out the full amount of unused sick leave to the employee, the employer may not use the accrual method with respect to that employee during the next benefit year.

Carryover notwithstanding, an employer is not obligated to allow an employee to use more than 40 hours of leave in any one benefit year.

The final regulations provide that an employer need not establish a single benefit year.  There may be future guidance defining how an employer can use individualized benefit years such as an employment anniversary. 

One of the significant matters addressed in the final regulations relates to an employer’s paid time off (PTO) policy.  An employer’s PTO policy can satisfy the obligations of the law but only if the entire PTO policy complies with each aspect of the Earned Sick Leave law.  Effectively, what this means is, if for example, an employer provides a PTO policy that can be used for any purpose, such as sick leave, vacation, personal time, etc., the full amount provided by the PTO policy must comply with the requirements of the Earned Sick Leave law.

In summary, employers subject to New Jersey Earned Sick Leave law will want to review their policies to ensure compliance.  New Jersey’s Department of Labor and Workforce Development provides on its website resources for employers, such as FAQs, fact sheets, guidance for earned sick leave policies and employer handouts.  It is certainly possible that additional guidance, and perhaps, even additional legislation may impact the Earned Sick Leave law.

City of Chicago’s PSL Ordinance Amended

In December 2019, the City Council amended Chicago’s Minimum Wage Ordinance.  Specifically, the amendment redefines employer and employee for purposes of the Chicago’s Minimum Wage Ordinance and Chicago’s Paid Sick Leave Ordinance.  The amendments take effect July 1, 2020. 

As background, Chicago’s Paid Sick Leave Ordinance took effect July 1, 2017, requiring employers to provide up to 40 hours of paid sick leave in a 12-month period (see our prior Benefit Beat article). 

Employers subject to the Ordinance

A covered employer is any employer who employs at least one covered employee and maintains a place of business in the city limits or is required to maintain a Chicago business license.   Effective July 1, 2020, a covered employer is defined as a person who gainfully employs at least one employee regardless of whether the employer has a Chicago worksite or is subject to business license requirements.

Employees entitled to leave

A covered employee is one who, in any particular two-week period, performs at least two hours of work for the covered employer while physically present within the geographic boundaries of the City.  To be eligible for leave, the covered employee must work at least 80 hours within any 120-day period.

Effective July 1, 2020, excluded from the definition of employee are:

  • An individual who works for an employer who has fewer than four employees;
  • An outside salesperson (regularly engaged in making sales or obtaining orders or contracts for services where most of such duties are performed away from the employer’s place of business);
  • A member of a religious corporation or organization;
  • A student at, and employed by, an accredited Illinois college or university;
  • Motor carriers regulated by the U.S. Secretary of Transportation or the State of Illinois; and
  • Certain camp counselors employed at a day camp.

Employer Notice Obligation. The Office of Labor Standards provides a Model Notice that must be displayed in a conspicuous place at the place of employment, and provided with each covered employee’s first paycheck.

Enforcement.  In 2019, Chicago created the Office of Labor Standards to enforce Chicago’s labor laws, i.e. Chicago’s Minimum Wage Ordinance, Paid Sick Leave Ordinance and the Fair Workweek Ordinance.  The Department of Business Affairs and Consumer Protection formerly enforced the paid sick leave ordinance. 

The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.

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