On July 13, 2015, the California Legislature passed Assembly Bill 304, which provides several key amendments to the recently enacted statewide paid sick leave law, the Healthy Workplaces, Healthy Families Act of 2014. Passed as emergency legislation, these amendments became effective immediately and are intended to clarify certain provisions of the original paid sick leave law. Below, I have highlighted the amendment’s most significant changes for employers.

Expanded Accrual Options

AB 304 provides a third sick-leave accrual method. Employers now have the option of using an alternative accrual method “provided that the accrual is on a regular basis so that an employee has no less than three days or 24 hours of accrued sick leave or paid time off by the 120th calendar day of employment, or each calendar year, or in each 12-month period.” This is important because it means that employers are no longer obligated to use the statutory accrual rate (i.e., one hour for each 30 hours worked), so long as the employee accrues three days or 24 hours of sick leave by the 120th day.

For employers that had Paid Time Off (PTO) policies in place prior to January 1, 2015, AB 304 also allows for a fourth accrual method. This option authorizes employers to continue using existing PTO accrual methods so long as:

(1) the accrual is on a regular basis;

(2) an employee earns no less than one day or eight (8) hours of accrued sick leave or PTO within three-months of employment, each calendar year, or each 12-month period; and

(3) the employee was eligible to earn at least three days or 24 hours of sick leave or PTO within nine months of employment.

Under the fourth accrual option, an employer cannot change its pre-January 1, 2015, accrual method as changes to the pre-existing accrual method will result in the policy being non-compliant and employers will have to use one of the other accrual options or the lump-sum option going forward. Employers can, however, increase the accrual rate.

Calculating the Rate of Pay

AB 304 offers employers more flexibility in calculating the rate of pay by providing an additional method of calculation.

For non-exempt employees with different hourly rates, paid sick time shall be calculated using one of the following two options:

(1) in the same manner as the regular rate of pay for the workweek in which an employee uses sick leave, whether or not the employee actually works overtime in that workweek; or

(2) by dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.

For exempt employees, the amendments provide that an employer calculate paid sick leave the same way it calculates other forms of paid leave time.

Eligibility of Employees

AB 304 provides clarity for employee eligibility, stating that an employee must work for the same employer for at least 30 days in California in order to qualify for paid sick leave benefits.

Unlimited Paid Sick Leave Policies

The amendments allow employers that offer unlimited PTO or sick leave to their employees to satisfy notice requirements and remain in compliance by indicating “unlimited” on employees’ itemized wage statements.

Reinstatement of Accrued Paid Sick Days

The provisions of the original Act require employers to reinstate accrued paid sick days to employees who are re-hired within one year of separation.

Amendments under AB 304, clarify that an employer is not required to reinstate any PTO that was paid out to an employee at the time of separation.

Recordkeeping Obligations

AB 304 makes it clear that an employer no longer has the obligation to inquire into or record the purposes for which an employee uses sick leave or PTO. However, as provided under the original Act, an employer is still required to keep records for three years documenting the number of hours each employee worked and paid sick days accrued and used by an employee.

Recommendation

Employers may want to consider taking advantage of these new options by making changes to their policies and revising their employee handbooks.

If you have questions about the amendments to the paid sick leave law, or would like me to review your employee handbook free of charge, please don’t hesitate to contact me at my office, or email me directly at slee@mwgjlaw.com.

Steven P. Lee is an employment law partner with Myers, Widders, Gibson, Jones & Feingold LLP, with six offices including Valencia (27240 Turnberry Lane, Suite 200). With 21 years of legal experience, Lee has authored several articles on employment law issues and frequently lectures to business leaders and HR managers on employment law-related topics. He can be reached at (805) 644-7188, or slee@mwgjlaw.com. His commentary does not constitute legal advice.