The Rise of Paid Sick Leave Mandates at the State and Local Level and Their Effect on Employers

The General Mechanics of Paid Sick Leave Laws

While the various state and municipal paid sick leave laws differ in several ways, most of them follow a similar framework that includes the following: broad definitions of “employer” and “employee” for coverage purposes, an accrual mechanism, rules regarding permissible use of leave, carryover allowance mandates, requirements for handling accrued leave upon an employee's separation from employment or transfer to a new location, record-keeping requirements, notice requirements, and enforcement provisions, including investigatory powers, imposition of penalties, and possible civil actions in which damages and attorneys' fees may be recoverable.

The definition of “employer” for coverage purposes varies somewhat from jurisdiction to jurisdiction. For example, Connecticut's law generally excludes manufacturers, whereas other jurisdictions like California, Seattle, and Minneapolis ' include all private employers regardless of the nature of their business and/or size, though some jurisdictions do not require the mandated leave to be paid if the employer is small enough. Not surprisingly, the trend seems to be toward inclusion of all employers, even small employers and non-profits, for coverage purposes.

As is true with the definition of “employer,” the definition of covered “employees” seems to be expanding to cover as many employees as possible. Minneapolis' recently adopted ordinance (which will be effective July 2017) is a good example, as the ordinance includes “any individual employed by an employer, including temporary employees and part-time employees, who perform work within the geographic boundaries of the City for at least 80 hours in a year for that employer.” See http://bit.ly/1UEPyJT. While the original proposal made some exceptions for very small employers and certain health care workers, even those provisions were watered down before the ordinance's adoption.

Similarly, Philadelphia's ordinance covers anyone who works within the city for at least 40 hours a year; and the ordinance in Emeryville, CA, requires otherwise eligible employees to work in the city for a mere two hours in one week to qualify for sick leave accrual. As a result of the broadening definition of “employee” under the various sick leave laws, any employer who has employees that work in a jurisdiction with mandatory paid sick leave, regardless of the employer's actual location, must track those hours worked by its employees in the covered jurisdiction, and allow for accrual of paid sick leave if the hours-worked threshold is met.

Unlike some of the coverage definitions, the mechanism for accrual of sick leave does not differ significantly in most jurisdictions. Rather, the laws generally allow employees to accrue one hour of sick leave for every set number of hours they work, and they provide for a yearly cap on accrual that typically tends to range from three to seven days. Many of the laws also require employees to wait a certain number of days before they can start using their accrued leave.

Furthermore, the laws generally outline permissible uses of accrued leave, which often include, but are not necessarily limited to, taking time off to: 1) receive preventative care; 2) recover from or treat an injury or illness; 3) care for a sick family member or obtain preventative care for a family member; 4) care for a child whose school or daycare has closed because of inclement weather or for other reasons; or 5) to seek medical attention or other assistance due to domestic abuse or sexual assault.

Many of the laws in effect or being considered do not allow employers to seek documentation for the leave until the employee has missed at least three days of work, leaving some employers concerned about potential abuse of sick leave.

The laws also frequently allow for at least some carryover of accrued but unused pay, meaning that employees may be able to build a bank of accrued leave. To date, the laws do not require employers to pay out any accrued balance upon an employee's separation, but employers may have to retain a terminated employee's accrued balance for a certain amount of time in case the employee returns to employment, at which point the balance must be reinstated. The same is true for employees who transfer to a different location ' their sick leave balances may need to be retained and then reinstituted upon return to a covered location.

Additionally, most sick leave laws generally include fairly detailed record-keeping and notice requirements, as well as mechanisms for enforcement, which may include penalties for each violation or a civil action with the potential for liability damages and attorneys' fees.

Finally, and fortunately for a sizeable number of employers, most, if not all, of the sick leave laws adopted to-date do not require employers that already provide at least the same amount of paid sick or paid leave to provide additional leave. However, employers must still comply with the laws' other requirements, including but not limited to any record-keeping and notice provisions (e.g., tracking, posting notices, and updating employee handbooks), or complying with the permissible uses for leave.

In short, the sick leave laws adopted to-date have all been fairly technical and detailed, as well as complex. As a result, there is significant room for employers to make compliance errors, and the accompanying legal liability for employers that have not taken the time to fully understand the laws and their requirements may be significant.

Common Compliance Challenges

In light of the complexity of the current sick leave laws and their patchwork existence, it is not surprising that employers have run into some compliance challenges. For example, employers operating in multiple jurisdictions that have adopted differing laws may need to adopt different policies and accrual systems for each unique jurisdiction. Alternatively, they may need to adopt one system for all employees that satisfies the most stringent requirements, which, if even administratively possible, can be a very costly solution.

Likewise, employers located outside of a covered jurisdiction that send employees into an area with a paid sick leave ordinance in effect may find themselves in a situation where some, but not all, of their employees are entitled to earn and use paid sick leave, which is obviously administratively difficult and also a potentially serious employee relations problem. For example, a soft-drink vendor located outside of a covered jurisdiction that sends its employees on delivery routes in a covered jurisdiction like Minneapolis or Philadelphia for a few days a week could quickly find itself needing to implement a system to track those employees' covered hours and allow them to accrue and use paid sick leave in accordance with the applicable law.

The same may be true for employers that allow employees to work at home on a regular basis if the employees live in a covered jurisdiction. Certain industries, including construction, food trucks, consulting and health care, may be hit particularly hard when it comes to the patchwork nature of the paid sick leave laws due to the nature of their businesses, which often require them to send employees where their clients or their work is located.

Employers in the above scenarios are faced with the difficult choice of determining which employees will receive the shifts that make them eligible to accrue paid sick leave and then confronting the resulting employee anger and possible disparate treatment claims that may bubble up as a result of their selections. To head off these issues, employers essentially have four choices: 1) adopt a paid sick leave policy for all employees; 2) develop a paid sick leave system for only covered employees (while ensuring that employees are selected for the covered work fairly ' this may involve a seniority or rotational system that gives numerous employees access to coverage or providing other benefits to non-covered employees); 3) develop a rotational work system that prevents any one employee from reaching the coverage threshold, which may be next to impossible for some employers or in some jurisdictions; or 4) end all employees' work in covered jurisdictions, which also is likely impossible for many, if not most, employers if they want to continue operating their businesses as they do now. Each of these choices presents various challenges that employers will have to overcome.

Employers that already have paid sick or paid time off programs may also run into compliance problems if they simply assume that their current programs are sufficient under the law. For example, an employer that allows for accrual of paid sick leave but does not allow for accrual quickly enough or does not allow sufficient carryover of accrued time may be in violation of the applicable law. The same is true for an employer that meets all other requirements of the law, but fails to maintain a terminated employee's sick leave balance for the requisite amount of time, or fails to post the required notice. Thus, it is critical for all employers that may be covered by a paid sick leave law to closely examine their current paid leave policies and programs to ensure full compliance.

Two other fairly common compliance concerns involve the difficulty of actually tracking covered hours, particularly for exempt employees who generally do not track their work hours, and potential abuse of the paid sick leave system in light of the laws' fairly strict provisions covering leave documentation requests by employers. In regard to the former concern, employers may need to purchase or develop technical solutions that reduce the administrative burden of tracking hours worked in covered jurisdictions. As for the latter concern, employers can, of course, still discipline employees who abuse their time off. However, doing so could also increase the risk of drawing a retaliation claim, so employers should tread cautiously and may want to consult with an employment attorney for guidance.

Compliance and Planning Advice for Employers

As discussed above, there does not seem to be an end in sight to the patchwork proliferation of paid sick leave laws. These laws are generally technical, complex, and fraught with compliance challenges. As such, it would behoove all employers, not just those in covered jurisdictions, to take the following steps sooner rather than later:

• Determine if your business is operating in a covered jurisdiction, and if so, determine which employees are covered.
• Even if you are not operating in a covered jurisdiction, determine if some of your employees are working in one, and if so, whether they are covered by the law.
• Consider potential problems and risks, and develop workable solutions, if only some of your employees are covered by a paid sick leave law.
• If your business is in a state or municipality that has adopted paid sick leave, you should:
• Examine any existing policies to determine if they are compliant and make any necessary changes.
• Implement a sick leave program if necessary.
• Update your employee handbook to reflect any changes.
• Ensure that proper record-keeping mechanisms, including hours tracking, are in place.
• Ensure that proper notice is delivered to employees.
• Provide any necessary training to employees who will be tasked with administering the program.
• Consider hiring competent employment counsel to review your sick leave policies and procedures to ensure compliance to avoid potentially costly penalties and litigation.
• Pay attention to your state legislature and city councils to determine if they are contemplating adoption of paid sick leave laws. If such legislation is being considered, you might want to:
• Contact or meet with your legislators or city council representatives to discuss the proposal.
• Attend or testify at hearings on the proposed legislation.
• Partner with local chambers of commerce to advocate for paid sick leave laws that work for both employees and employers.

Lisa Schmid is an attorney with Nilan Johnson Lewis in Minneapolis. She can be reached at [email protected] or 612-305-7549.

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