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California's New Paid Leave Law Amended

July 17, 2015

On July 13, 2015, Governor Brown signed AB 304, amending California's paid sick leave bill, known as the Healthy Workplaces, Healthy Families Act of 2014. The law had become fully effective on July 1. Due to an urgency clause attached to the bill, the revisions made by the bill take effect immediately. Key changes to the law are discussed below.

  • New option for accruing sick leave available. In lieu of accruing sick pay at the rate of one hour per every 30 hours worked, an alternative method may be used, designed to be especially helpful to employers whose payroll systems don't have the capability of tracking hours worked by exempt employees. To use this option, employers must accrue on a regular basis, and at least 24 hours of accrued sick pay must be made available to the employee by his or her 120th day of employment, calendar year, or 12-month period. Employers also still have the option of depositing a minimum of 24 hours of accrued sick leave up-front in a leave bank for use by the employee.
  • Pre-existing policies already in effect. Existing policies in effect prior to January 1, 2015 with different accrual methods than those under the new law can remain in effect as long as accrued leave is made available (by July 1,2015) that could be used for the same purposes and under the same conditions as required by the new law, and leave is accrued on a regular basis, such that the employee has no less than 1 day (or 8 hours) of accrued sick leave or PTO within 3 months of employment of each calendar year or each 12-month period, and the employee was eligible to earn at least 3 days or 24 hours of sick leave or PTO within 9 months of employment. Any change to the pre-existing accrual method, however, must comply with the new law.
  • Time period for using sick leave clarified. Under the law, employees are able to begin using their accrued paid sick days beginning on their 90th day of employment, after which they may use paid sick days as they are accrued, up to a maximum number of 24 hours, or 3 days per year of employment. AB 304 clarifies that in addition to per year of employment this limitation could also apply to each calendar year, or any 12 month period, and that the full amount of the leave means 3 days or 24 hours.
  • Employees eligible for sick leave. The law is also amended to clarify that to qualify for accrued sick leave the law applies to employees who have worked in California for the same employer for 30 or more days within a year.
  • Reporting of unlimited sick/PTO. Employers must track sick leave accrued and used for each employee and indicate remaining sick leave available to the employee on the employee's pay stub (or document accompanying the pay stub). Those employers with unlimited sick leave and paid time off (PTO) policies may satisfy this requirement by indicating "unlimited" on the employee's itemized wage statement.
  • Expansion of methods to calculate sick pay rates. In calculating a nonexempt employee's paid sick leave amount, an employer may either base it (1) on the employee's regular rate of pay for the workweek in which the employee uses the sick time, whether or not the employee actually works overtime during that week, or (2) by dividing total wages (excluding overtime pay) by total hours worked in the full pay periods over the prior 90-day period. For exempt employees, paid sick time should be calculated in the same manner as the employer calculates wages used for other forms of paid leave.
  • No restoration of previously paid out PTO upon rehire. If the employer has a PTO policy that pays out unused time off at termination, resignation or separation from service, that previously unused accrual doesn't have to be reinstated should the employee be subsequently rehired within a year of his or her termination, resignation or separation.
  • Documentation of employee use of sick leave. AB 304 amends the sick leave law to clarify that an employer has no obligation to inquire into or record the purpose(s) for which an employee uses sick leave or PTO.
  • Definition of "Employee". To conform to state law governing CalPERS "retired annuitants," the definition of "employee" for purposes of the law is amended to not include retired annuitants. Thus, retired individuals will be able to return to work and still be able to receive their pension annuity from CalPERS. A clarification was also made to the definition of "employee in the construction industry" (potentially excluded from the definition of "Employee") to mean an employee performing "work" in that industry, deleting a reference to "on-site work."
  • Delayed notice requirement for certain employers. The notice and employee reporting requirements for employers in the broadcasting and motion picture industries are delayed until January 21, 2016.

The Healthy Workplaces, Healthy Families Act of 2014, as amended, is available at http://leginfo.legislature.ca.gov/faces/billCompareClient.xhtml?bill_id=201520160AB304

For additional information, please contact your Burnham Benefits Consultant or Burnham Benefits at 949-833-2983 or inquiries@burnhambenefits.com.


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