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California and San Diego Sick Leave Laws:
Understanding the New Laws and
Taking a Close Look at Your Paid Time Off Policies 

Both California and San Diego have enacted mandatory sick leave laws that affect all companies with California and San Diego employees.  We will outline the law, and also highlight some ideas for making your paid time off policies more effective.   

In this Newsletter, you will find:
If you would like to review prior newsletters for more tips and tools for creating clear expectations, click here.  In our next issue, we will talk about recent development is how you need to pay and treat inside and outside salespeople.  What you don't know may surprise you. 
Ten Things You Need to Know About California's New Sick Leave Law
Beginning July 1, 2015, any employee who works in California for 30 or more days in a calendar year is entitled to paid sick days as specified in the new Healthy Workplaces, Healthy Families Act of 2014. 
Here are 10 things you need to know about the new law:  

1.     An eligible employee will accrue one hour of sick leave for every 30 hours worked, beginning at the commencement of employment.   The employee begins to accrue sick leave on the first day of work, but the employer may prevent the employee from taking any sick days before the completion of 90 days of employment. 
        Sick leave is paid at the employee's regular hourly rate. If in the 90 days of employment before taking sick leave had different hourly pay rates, was paid by commission or piece rate or was a nonexempt salaried employee, then the regular hourly rate is calculated by dividing the employee's total wages (excluding overtime pay), by the employee's total hours worked in the prior 90 days of employment.
2.     Exempt employees are eligible for sick leave and are considered to work 40 hours per workweek, unless their normal workweek is less than that, in which case the employee will accrue sick days based on that normal workweek.
3.     Accrued but unused sick days will carry over to the following year of employment, but an employer may limit an employee's use of paid sick days to 24 hours or three days in each calendar year of employment.  An employer may avoid employee carry over if it adopts a policy that grants the employee at least three days paid sick leave at the beginning of each year.  An employer is not required to pay out unused sick leave at termination.
4.     Previously accrued and unused sick days must be reinstated and immediately available if an employee separates from an employer and is rehired within one year.  
5.     You may already be in compliance: If you already have a PTO or sick leave policy that is as or more generous than the law (be sure to check both accrual and use rules), you do not need to change anything in your handbook . . .
Click here to read about the other elements of this new law. 

Understanding San Diego's Sick Leave Law
Effective April 1, 2015, employers are required to provide paid sick leave to any employee (defined as an individual entitled to payment of a minimum wage) who in one or more calendar weeks of the year performs at least two hours of work within the geographic boundaries of the City of San Diego.
There is no requirement that the employer be headquartered in San Diego or even located in California.  Nor is there a requirement that the employee reside in or regularly work in San Diego or California. 
Here are some general rules: 
1.     Employees will earn one hour of paid sick leave for every 30 hours worked within the geographic boundaries of the City, with a maximum accrual of 40 hours per year.  Fractional sick leave is not earned for partial hours worked.  Earned sick leave must be compensated at the same hourly rate or other measure of compensation as the employee earns from his or her employment at the time the employee uses sick leave.  Bona fide independent contractors are not entitled to paid sick leave.  You may prohibit an employee from using sick leave until after 90 calendar days of accrual.  

2.     Exempt employees are eligible for sick leave and are assumed to work 40 hours in each work week for purposes of sick leave accrual unless their regular work week is less than 40 hours, in which case sick leave accrues based upon that regular work week.

3.     Employers may set a reasonable minimum increment for the use of sick leave, not to exceed two hours.

4.     Employees will be allowed to carry over unused sick leave to the following year, but employers are not required to pay out unused sick leave upon the employee's separation from employment.  Employers may limit an employee's use of sick leave to 40 hours per "benefit year" (a regular and consecutive twelve-month period). 

5.     You may already be in compliance if your current sick leave or paid time off policy is as or more generous than the San Diego law. 
6.     Previously accrued sick leave that was not used or paid out must be reinstated when an employee is rehired by the same employer within six months of a separation from employment and that employee immediately is entitled to use that accrued sick leave . . .
Click here to learn more about San Diego's new law.  This is a somewhat controversial issue in San Diego, and we will advise you of any changes.
Also, remember that other cities and states may have their own sick leave laws.  For example, Jersey City, New York City, Portland (OR), San Francisco, Seattle, Washington DC and Connecticutt have mandatory sick leave laws, and others are proposing the same.  
Your Paid Time Off Policies:
What Haven't You Thought About?
We review a lot of paid time off policies (those that combine sick leave and vacation into PTO, and those that separate out vacation and sick leave policies), and for an apparently simple policy, there is a lot to consider!  Below you will find a couple basic elements, along with some questions you may not have addressed.  

 1.      How Do Employees Accrue Paid Time Off?  Typically an employer will describe a maximum annual accrual and outline that the employee will either accrue a certain number of paid hours per pay period or per hour worked.  If you use the latter method, and the employee takes vacation as you have encouraged her to do, she will never in fact earn the maximum vacation amount.  This is not unlawful, but does it reflect your intention of providing that maximum accrual? 
2.     When Do New Employees Begin to Accrue Paid Time Off?  When Are They Eligible to Take It?  First, be sure your sick leave or paid time off policies take into account the new law, which mandates that sick leave begins to accrue on the first day of employment.  Second, look at your accrual chart: have you told employees that they do not accrue vacation until after completion of 90 days, but nonetheless described their vacation entitlement in terms of a full year of benefits?  The enforcing agencies will construe that the employee is, in fact, accruing during the first 90 days where your chart suggests that they earn 12 months' of vacation in a 9-month period. 
3.     How Do Exempt Employees Take Partial Day Absences?  As a first thought, have you remembered to note that a full day absence for purposes of taking paid time off is eight hours?  More important, have you thought about whether and how exempt employees may take partial days off?  Remember, California and federal law allow you to require that an exempt employee use accrued paid time off for partial day absences.  (Be very careful here: you may never deduct partial day absences from wages, but you may deduct them from paid time off). Have you made a decision on this?  Be clear in your policy.   
4.     What About Full Day Absences by Exempt Employees?  Remember, so long as your policy is express and clear, you are allowed to deduct an exempt employee's full day absences from wages if that employee absents himself for a full day and has exhausted accrued paid time off.  However, if an exempt employee works any part of that day, then he has not absented himself, has he?  You need to decide whether you want to require that employees who absent themselves for vacation, sick leave or PTO turn off their phones and computers.  If you want them to remain connected from a beach in Aruba, expect to pay them for some or all of the days on which they work.  
5.     Have You Implemented a Cap on Accrual?  You cannot have a "use it or lose it" policy in California by which employees lose earned vacation if they do not use it within the year.  But you can, and should, create a cap on their accrual.  This both encourages employees to take vacation each year and creates a cap on your vacation liability.  The ideal cap is 1.5 times annual accrual. 
6.     How do Piece Rate and Commissioned Sales People Accrue Paid Time Off?    If you want these employees to accrue paid time off, then you need to consider how they will be paid when they do take the time off.   
7.     What Happens in Your Company When a Non-Exempt Employee Has Exhausted Paid Time Off and Wants to Take a Day Off?  Do you allow employees to take time off without pay once they have exhausted paid time off?  This is not unlawful, but creates real risks for claims of inconsistent application of the policy.  How can you counsel an employee for excessive absences if you regularly are allowing employees to take time off in excess of the paid time off caps?  You can always be generous, and you must at the same time be mindful of the consequences.
8.     What Happens to Paid Time Off During Leaves of Absence?  Many companies have policies that state that paid time off is not accrued during medical, pregnancy or other leaves of absence.  But do you apply that same policy to employees when they go on vacation?  If not, there is an argument that you are treating, for example, disabled employees less generously than non-disabled employees who take time off.  We recommend that you suspend the accrual of paid time off during any unpaid leaves of absence.  
9.     Remember One of Our Pet Peeves:  Paid time off is a privilege, not a right.  Except as limited by these new laws, employees still need to request and be granted permission to take time off.  Abuse of attendance policies can and should be addressed, even if the employee has accrued paid time off on the books.   

How Can We Help?
Paid time off policies can be tricky to draft and enforce.  We are happy to help you simplify this process:
1.     Review Your Policies.  We are happy to review your employee handbook to make sure you have captured the changes to the law described above and that you are creating clear and shared expectations.

2.     Review of Your Time Off Practices.  We know this is an area of susceptibility for many well-intentioned companies. We are happy to review your practices to ensure they are legally compliant.
3.     Management Training to Reduce Risk and Increase Productivity. Do your managers understand what they can and cannot do in the area of time off?  We can help you educate your managers to protect your company from liabiity.  
Please let us know if we can help, 619-906-2400 or by e-mail.