Governor Brown Signs Into Law Assembly Bill 304, Clarifying California’s Paid Sick Leave Law

Last year, California passed the Healthy Workplaces, Healthy Families Act of 2014 (the “Act”), which took effect on July 1, 2015, and provides paid sick leave to most California employees. Since then, employers have scrambled to understand and implement the law, which left more questions than it did answers even for those employers who already provided paid sick leave to their employees.

This week, with Assembly Bill 304 (“AB 304”), the Legislature has taken significant steps to clarify some of uncertainty that existed in the original statute. Specifically, the bill:

• Clarifies where employees must work to be eligible for accrued sick leave.
  The Act required employers to provide paid sick leave to all employees who work at least 30 days in California. It did not state whether the 30 days had to be spent working for the same employer or whether the time could be spread across multiple employers. AB 304 clears up that confusion and requires employees to work for the same employer for at least 30 days in the prior 12 months to be eligible for paid sick leave benefits with that employer.
• Clarifies how sick leave accrues and may be used.
  The Act provided for accrual of paid sick leave at a rate of one hour for every 30 hours worked, to be used beginning on the 90^th day of employment. Employers may limit an employee’s use of paid sick leave to 24 hours (or three days) each year of employment. AB 304 permits employers to use a different accrual method, so long as the accrual is on a regular basis and provides for employee accrual of at least 24 hours of paid sick leave (or other paid time off, such as PTO) – that is available for use – by the 120^th calendar day of employment. It further authorizes an employer to limit an employee’s use of paid sick leave to 24 hours (or three days) in each year of employment, calendar year, or other 12-month period.
• Clarifies how paid sick leave is calculated.
  For employees who are paid different rates of pay during a single pay period, e.g., employees who are paid overtime, commissions or piece rates, the Act required employers to divide an employee’s total pay within the prior 90 days by the total hours worked to calculate an hourly pay rate for paid sick leave. AB 304 modifies that calculation and allows employers to determine paid sick leave rates using one of the following calculations: (1) for nonexempt employees, paid sick leave may be calculated in the same manner as the regular rate of pay for the workweek in which the employee uses paid sick leave even if the employee works overtime in that workweek; (2) for nonexempt employees, paid sick leave may be calculated by dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment; (3) for exempt employees, paid sick leave is calculated in the same manner the employer calculates wages for other forms of paid leave, such as vacation.
• Clarifies sick leave accrual for reinstated employees.
  The Act did not require employers to pay out accrued sick leave at the time of termination, resignation or separation, as is required for vacation and PTO accruals. But, it left uncertainty for employers who elected to pay out sick leave accruals at termination and subsequently rehired those same employees within one year. AB 304 clarifies that employers need not reinstate paid sick leave balances for employees who return within one year if the employer already paid out the sick leave at the time of the employee’s initial termination, resignation, or separation.
• Clarifies what employers with existing paid leave policies are required to provide to employees.
  The Act left many questions about the obligations of employers who already provided paid sick leave prior to implementation of the Act. AB 304 specifies that employers who already had paid leave policies are not required to provide additional paid sick leave to their employees if they already provided leave that could be used for the same purposes and under the same conditions as the Act so long as their policy satisfies the accrual, carry over, and use requirements of the Act or meets other specified minimum requirements.
• Clarifies how employers must document unlimited sick leave.
  The Act required employers to inform employees of their paid sick leave balance in writing on a pay stub or separate writing accompanying the employee’s paycheck or pay stub. AB 304 allows employers who provide unlimited paid sick leave to simply state “unlimited” on the relevant document.
• Clarifies record-keeping requirements.
  The Act required employers to record and keep records of hours worked and the amount of paid sick leave accrued and used during the prior three years and to make those records available to the Labor Commissioner upon request. AB 304 clarifies that employers have no obligation to inquire into or record the purposes for which an employee uses sick leave or other paid time off.

AB 304 also makes several minor definitional changes, e.g., the definition of an employee excludes specified retired annuitants, and delayed application of certain provisions for employers in the broadcasting and motion picture industries.

AB 304 takes effect immediately as an urgency statute. While questions still remain regarding the practical application of the Act, these revisions help clarify employer obligations regarding paid sick leave. Employers should review their current sick leave and/or paid time off polices in light of these changes to determine whether any changes are warranted.

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