SB 304: Clarifies healthy workplaces law

On July 13, 2015, Gov. Jerry Brown signed Assembly Bill 304, a bill that clarifies some of the major components included in the comprehensive 2014 California Healthy Workplaces, Healthy Families Act (HWHFA). AB 304 clarifies several major provisions:

Existing PTO Plans

HWHFA says an employer need not provide additional paid sick leave if the employer already had in place, as of Jan. 1, 2015, paid sick leave or PTO policies that were at least as generous as under HWHFA and could be used for the same purposes.

However, under the amendments, if the employer modifies those grandfathered plans, the employer must then comply with the new requirements. Employers who provide unlimited paid sick leave or unlimited PTO to an employee meet the reporting obligations by stating "unlimited" on the wage statement in place of listing hours.

Accrual and Reinstatement

Employers may now use different accrual methods. The amendments allow an employer to use an alternative method if it is (a) on a regular basis, and (b) the employee has no less than 24 hours or three days paid sick leave or PTO by the 120th calendar day of employment, or each calendar year, or in each 12-month period (as determined by the employer). For example, an employer that wants to allow accrual at a faster rate may accrue one hour for every 20 hours worked.

HWHFA requires employers to reinstate any previously accrued, unused paid sick leave if an employee separates from employment but is re-hired within one year. The amendments clarify that, if the employer pays the accrued but unused sick leave at the time of separation (not required under HWHFA), then the employee is not entitled to reinstatement of those hours.

Limitations on Use

Employers may limit employees' use of sick leave. The amendments allow an employer to limit use of sick leave to three days or 24 hours in (a) each year of employment, (b) each calendar year, or (c) each 12-month period, at the employer's choosing, as long as the employer regularly maintains the method of limitation.

The amendments clarify that an employer need not inquire into or record the reasons why employees use sick leave. The employer must only document and keep records of the hours worked and paid sick days accrued and used by an employee for at least three years. Because of the risk that an employee may, in some circumstances, claim that the employer implemented disciplinary action or termination in retaliation for taking paid sick days, not recording, asking, or being concerned about the reason for using paid sick leave may help the employer defend against such a claim.

Calculating Sick Leave Rate

Employers now have options for calculating the amount of pay owed to employees while taking sick leave. They can use any of the following calculations when determining how much to pay employees while on paid sick leave:

For non-exempt employees, the regular rate of pay is calculated in the same manner as for overtime purposes.

For non-exempt employees, the regular rate of pay is calculated by dividing the employee's total wages (excluding overtime pay) by the employee's total hours worked in the prior 90 days.

For exempt employees, employers can calculate paid sick leave in the same manner as the employer calculates wages for other forms of paid leave time.

Julie M. Capell is a partner and Bennett J. Kaspar is an associate in Winston & Strawn's Los Angeles office.