California Paid Sick Leave

Seyfarth Synopsis:  June 7, 2018, when the city’s new Paid Sick Leave rules take effect, marks the latest chapter in the City by the Bay’s long history of imposing local employment standards that exceed state requirements. Here’s what you need to know before this latest San Francisco peculiarity begins.

On May 7, 2018, after considering public input on proposed rules to the City’s Paid Sick Leave Ordinance (PSLO), the San Francisco Office of Labor Standards Enforcement (OLSE) published new rules interpreting the PSLO, which is the granddaddy of municipal paid sick leave (PSL) mandates. The OLSE enacted its original interpretative PSL rules in May 2007. More recently, on January 1, 2017, the OLSE amended the PSLO. Now, nearly 18 months later, updated rules will take effect on June 7, 2018. Highlights of some key aspects follow.

Joint Employers

The PSLO broadly defines “Employer” as “any person…who directly or indirectly…employs or exercises control over the wages, hours, or working conditions of an employee.”

The new rules state that if an employee is jointly employed, and at least one employer is covered by the PSLO, each employer must comply with the PSLO. The rules follow California law to determine if an employee is jointly employed. The OLSE notes, by way of example, that joint employment can occur when an employer uses a temporary staffing agency, leasing agency, or professional employer organization. The new rules further state that a “controlled group of corporations” (as defined by the IRS Code), is considered to be a single employer under the PSLO. Employees of unincorporated businesses also are counted as working for one employer if the business satisfies the IRS’s “controlled group of corporations” definition.


Under the PSLO, an employer may only take reasonable measures to verify or document an employee’s use of PSL. As stated in the OLSE’s original PSL rules, employers generally can require employees to provide reasonable documentation justifying their use of PSL for absences of more than three consecutive full or partial workdays. The new rules further explain that employer policies requiring a doctor’s note or other documentation when employees use PSL (a) to attend a medical appointment, or (b) in situations of a pattern or clear instance of abuse will be presumptively reasonable even if the use of PSL was for three consecutive workdays or less.

Rate of Pay

The new rules also provide guidance on calculating employees’ rate of pay for used sick leave and generally track the California statewide standards. Like the CA law,  San Francisco’s new PSL rules require different rate of pay calculations for exempt and non-exempt employees. Although the PSLO does not define “regular rate of pay” or “exempt employee,” the new rules defer to the California Division of Labor Standards Enforcement for calculating an employee’s regular rate of pay, and state that an employee’s exempt or non-exempt status is based on whether the employee is exempt from overtime pay under the FLSA and California law. If an individual is exempt, and no other forms of paid leave are provided, the employee must be paid his or her salary without any deduction for sick time taken. However, the time taken can be applied against the employee’s sick leave balance.

Rehired Employees and Breaks in Service

Under the PSLO, employees are entitled to use accrued PSL beginning on the 90th day of employment. For rehired employees, if an employee separates from the employer and is rehired by the same employer within one year, all previously accrued, unused PSL must be reinstated.

In instances where an employee separates from an employer before the 90th day of employment and is rehired within one year, the new rules clarify that the original period of employment is counted toward satisfying the 90-day usage waiting period. For example, if an employee separates from an employer after working for 45 days, and then one month later is rehired, the employee must work another 45 days before the employer needs to permit the employee to use his or her accrued PSL.

Unionized Workforces

The new rules make clear that many PSL practices or policies that have been deemed reasonable in a bona fide collective bargaining agreement (“CBA”) remain so, even if the CBA does not explicitly waive or reference the corresponding PSLO section. This can include practices or policies about notification, verification, increments of time in which paid sick leave must be taken, and sick leave pay rate.

The Upshot

In its introduction to the new rules, the OLSE stated that it was guided by the need to provide clear direction to employers and employees about the PSLO. While these new rules clarify certain gray areas under the PSLO, it remains to be seen whether they will result in further clarification or modifications to the OLSE’s interpretation of the Ordinance.

To stay up-to-date on San Francisco, California, and general Paid Sick Leave developments, click here to sign up for Seyfarth’s Paid Sick Leave mailing list.

Counting moneyWe normally write about how California law differs from American law generally. Today, though, we highlight a recent California case that rejected the notion that California law should deviate from analogous federal wage and hour law. That case is Alvarado v. Dart Container Corp. of California. More detailed information appears here.

In Alvarado, the California Court of Appeal ruled that an employer complies with California law when it uses the federal method of calculating the regular rate of pay in determining the overtime premium pay owed on a “flat sum” bonus.

Why are we writing about this? Well, under both California law and federal law, employers must pay overtime premiums based on the regular rate of pay. The regular rate is also important in California because it is the rate at which benefits under the California Paid Sick Leave Act must be paid to non-exempt employees (unless the 90-day lookback method is used). Therefore, knowing how to calculate the regular rate is important to ensure that employers make these payments properly.

Calculating the regular rate includes all items of remuneration paid to non-exempt employees, except for those items that are specifically excludable. The regular rate thus includes almost all payments, including non-discretionary bonuses. Employers, in paying those bonuses, sometimes forget to add overtime premium pay. The employer in Alvarado remembered to make that payment, but used a method of calculating the regular rate that an employee then challenged

The employee was paid a $15 attendance bonus for working weekend shifts. The employer calculated the overtime pay due on this bonus by using the FLSA method of calculating the regular rate of pay. Under the FLSA regulations, an employer may derive the regular rate of pay by simply adding the bonus to the other includable compensation paid and then dividing the sum by the total number of hours worked. The regulations provide an example: an employee works 46 hours in a week, earns $12 an hour, and receives a $46 production bonus for the week.  Under the FLSA formula, the regular rate of pay would be $13 an hour [(46 hours x $12/hour) + $46 bonus] / 46 hours].

California statutes do not specifically address how to calculate the regular rate of pay in computing the overtime pay due on a non-discretionary bonus. Thus, like many employers, the employer in Alvarado used a formula that was consistent with the FLSA formula.

The California Department of Labor Standards Enforcement, meanwhile, has taken a different, peculiarly Californian position: the DLSE has opined that the regular rate must be the sum of all compensation divided by only the regular (non-overtime) hours worked.  Otherwise, the DLSE has reasoned, the regular rate would be diluted in a way that would conflict with a general California public policy discouraging the use of overtime hours.

The Alvarado court, noting the absence of specific statutory guidance on this subject, rejected the DLSE’s position. The Court of Appeal held that the DLSE’s view was not valid and that employers do not violate California law when following the federal standard.

Now, California employers who pay “flat sum bonuses” in the same pay period that they are earned should be able to rely on the FLSA regulations for calculating overtime payments.  It turns out that, in this particular respect, California is not so different after all.

iStock_000048342610_LargeEmployers navigating the treacherous waters of California’s new Paid Sick Leave Law and its recent amendments recently received some welcome guidance from the Labor Commissioner. On the heels of an August 7, 2015 opinion letter, in October, the LC issued updated FAQs to assist employers comply with the new law.

While much of the information in the updated FAQs remains unchanged from the original FAQs issued in December 2014, the updated FAQs incorporate the changes from the recent statutory amendments, provide answers to some burning questions, and add more detailed information about the law. Here are highlights from the updated FAQs and the August 7, 2015 opinion letter:

Qualified Employees. The initial FAQs identified three categories of individuals who are exempt from the law. The updated FAQs identify one more—retired annuitants working for governmental entities.

Compliant Sick Pay Policies. While the initial FAQs addressed how much paid sick leave employees are entitled to under the new law, the updated FAQs expand on this point to discuss employers’ different policy options (incorporating information from the recent amendments of course!).

Accrual Policy. As we all know by now, under an accrual policy, employees accrue sick leave at the rate of at least one hour for every 30 hours worked, up to a cap of 48 hours or six days. But employers can limit the amount of sick pay an employee can use each year. The updated FAQs and the August 7, 2015 opinion letter clarify that employers can limit the use of paid sick pay to 24 hours or three days, whichever is more for the employee. So if an employee regularly works 10-hour days and has accrued 30 hours of sick pay, the employee would be entitled to use all 30 hours; the employer could not limit the accrued sick pay to only 24 hours. Similarly, if an employer regularly works six-hour days and has accrued 24 hours, then the employee would be entitled to use all 24 hours.

The amendments allow employers to deviate from the original accrual method (one hour for every 30 hours worked) so long as employees accrue at least 24 hours of paid sick time by the 120th calendar day of employment.

No Accrual/Up Front Policy. Under a no accrual/up-front policy, the employer front loads the full amount of paid sick leave each year. The FAQs and the August 7, 2015 opinion letter answer the burning question of what constitutes the “full amount of paid sick leave”: Twenty-four hours or three days, whichever is more for the employee. So if an employee regularly works 10-hour days, the employer must front-load 30 hours of paid sick leave at the beginning of the year (not 24). Similarly, if an employee regularly works six-hour days, then the employer must front-load 24 hours (not three days).

The amendments regarding the no-accrual method clarified that employers who use this front-loading method can grant the full amount of leave at the beginning of each calendar year, each year of employment, or any other 12-month period. The full amount of leave must be available for employees to use immediately. Paid sick leave need not be available to new hires until the 120th day of employment.

Grandfathered Policies. The amendments provide that certain policies can be “grandfathered” if the policy existed before January 1, 2015 and (1) the accrual provides no fewer than one day or 8 hours of accrued paid sick leave or paid time off within three months of employment per year and (2) the employee was eligible to earn at least three days or 24 hours of paid sick leave or paid time off within nine months of employment. But beware! An employer that modifies a grandfathered policy nullifies the grandfathered qualification, and the employer must then comply with either the accrual or no-accrual policies described above.

Of course, employers may also provide paid sick leave through existing PTO or sick pay policies, so long as the policy satisfies the accrual, carryover and use requirements of the new law and applies to all qualified employees.

Seasonal And Returning Employees. The updated FAQs discuss paid sick leave for seasonal/returning employees. The law requires that an employee’s accrued and unused sick leave be restored if that employee returns to the same employer within 12 months from the previous separation. Employers need not restore sick leave to employees who return to work for the same employer after more than one year. The amendments have clarified that employers need not restore previously accrued paid sick leave provided under a PTO policy where the employee’s PTO was cashed out at the end of employment.

Unlimited Time Off. The updated FAQs address the amendments regarding unlimited time off policies. The law requires that employers, on each payday, provide written notice to employees regarding the amount of paid sick leave they have available. The amendments have clarified that employers with unlimited paid time off plans can meet this requirement by indicating, on itemized pay stubs or on separate written statements. that the paid sick leave is “unlimited.”

Pay for Sick Leave. The updated FAQs address both the original method for calculating sick pay and the new method added by the amendments. Initially, the only method for calculating sick pay was by dividing the total compensation for the previous 90 days (excluding overtime) by the total number of non-overtime hours worked in the full pay periods of the prior 90 days of employment. The amendments provided a new method for this calculation: the employee’s regular, non-overtime rate of pay for the workweek in which the employee used sick leave. Exempt employees’ rate of pay for sick leave is calculated in the same manner the employer calculates wages for other forms of paid leave time (e.g., vacation or PTO).

30-Day Eligibility Requirement. Before the updated FAQs, it was unclear whether employees were required to work in California for the same employer for at least 30 calendar days or work days to be eligible for paid sick leave. The updated FAQs clarify that this 30-day requirement is calendar days.

While the FAQs and the opinion letter do not address every potential question regarding the new law and amendments, they provide more guidance and clarification on the law. Stay tuned as we’ll continue to keep you posted on any new paid sick leave developments.

(Photo) Sick PhoneBy Kristina Launey

On March 26, 2015, Assembly Member Lorena Gonzalez – the author of California’s Paid Sick Leave law, the Healthy Workplaces, Healthy Families Act of 2014 (the “Act”) – introduced amendments to that law. The vehicle for those amendments, Assembly Bill 304, was re-referred to the Assembly Committee on Labor and Employment to be set for hearing.

The bill would amend Labor Code sections 245.5, 246, and 248.5, to make the following changes to the Act:

  • Require that an employee work for the same employer for 30 or more days within the previous 12 months to qualify for paid sick leave under the Act.
  • Regarding the definitions in the Act:
    • Exclude a retired annuitant of a public entity and a worker covered by the Railroad Unemployment Insurance Act, as specified, from the definition of employee.Remove the definition of health care provider.
    • Authorize an employer to provide for 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 at least 24 hours of paid sick leave accrued by the 120th calendar day of employment.
  • Clarify that no accrual or carry over is required if employees receive the full amount of paid sick leave at the beginning of each calendar year, year of employment, or 12-month basis, rather than the previous ambiguous reference to simply “year.”
  • Permit an employer that provides unlimited sick leave to its employees to satisfy notice requirements by indicating “unlimited” on the employee’s itemized wage statement.
  • Delete the current rate of pay provision in Section 246(k), and instead provide that if the employee receives different hourly rates when the accrued sick leave is taken, then the rate of pay would be calculated in the same manner as the regular rate of pay for purposes of overtime.
  • Provide that an employer is not required to reinstate accrued paid time off to an employee who is rehired within one year of separation from employment, that was paid out at the time of termination, resignation, or separation.
  • From Section 248.5(e), remove “any person” with respect to enforcement of the Act’s provisions, which would likely remove concern that a private right of action exists.
  • Make other “technical and conforming changes.”

But the bill contains no urgency clause—which would be necessary for the amendments to take effect prior to the effective date of July 1, 2015 that applies to the bulk of the Act’s rights and obligations. Unless later amendments add an urgency clause (as they should), the contemplated amendments to the bill won’t take effect until January 1, 2016.

We’ll continue to follow this bill as it moves through the legislative process and keep you updated. For background on the Act, see our prior blog posts here and here.