What Business Owners Need to Know About California’s New 5-Day Paid Sick Leave Benefit

As a business owner in California, keeping up to date with labor laws and regulations is crucial to keeping your business compliant and avoiding any fines or penalties. One of these laws you need to be aware of is Paid Sick Leave, which was rolled out in 2015. However, with the benefit increase announced recently, it’s important to know what changes are coming and how they will impact your business.

The Paid Sick Leave benefit allows employees to earn paid time off to take care of their own health needs or the needs of their family members. Until recently, California required employers to provide only 24 hours or three days of paid sick leave per year.

However, beginning January 1, 2024, employees must be able to use up to 40 hours or five days per year of paid sick leave.

Business owners should familiarize themselves with these regulations and make necessary changes.

This new benefit can be taken for different reasons, including:

• The employee’s own illness, physical condition, or mental condition, including pregnancy and childbirth.
• The employee’s domestic partner, child, parent, spouse, grandparent, grandchild, or sibling who has an illness, physical condition, or mental condition that requires care.
• A leave related to domestic violence, sexual assault or stalking.

Under the new paid sick leave law, businesses can frontload the total 40 hours or implement an accrual system. Incidentally, California law has minimum requirements for how employers implement their accrual system. Either way, providing such benefits to the employees promotes their morale, productivity, and health.

Accrual Methods: The customary accrual pace, which allows for 1 hour of sick leave per 30 hours of work, remains constant. If employers opt for another accrual method, they must ensure that their employees accumulate at least 24 hours of sick leave by their 120th day in employment, within each calendar year or any other 12-month span. Additionally, all employees should be able to earn the full 40-hour benefit by their 200th day in employment, annually or within any 12-month period. It’s important to note that the rate of accruing 24 hours in 120 days and 40 hours in 200 days is consistent.

Lump Sum Methods: Employers who choose the lump sum method must grant a minimum of 24 hours, or three days of sick leave, to be utilized no later than the employee’s 120th day of employment – a criterion that remains unchanged. Furthermore, the full benefit of 40 hours, or five days, must be made available after the employee’s 200th day of employment. This appears to permit the provision of 24 hours or three days of sick leave following the completion of the employee’s 120th day of service, while the remaining 16 hours or two days are held back until the completion of their 200th day of employment.

Certainly, employers retain the option to offer the entire duration of leave upfront, and there’s no obligation to split it into two portions. Moreover, they may grant employees the ability to utilize sick leave before reaching the 120-day employment mark. If employers choose to provide the full leave amount—40 hours or five days—at the beginning of each year via the lump sum method, they are not required to permit carryover. However, if the employer opts to split an employee’s lump sum leave allocation into 24 and then 16 hours—or any other combination that doesn’t present the total leave amount at the year’s commencement—carryover cannot be avoided, as per the law.

Compliance: The annual utilization limit has been updated to 40 hours or five days, seeing an increase from the previous limit of 24 hours or three days. Furthermore, the comprehensive rolling accrual limit has been elevated to 80 hours or 10 days, a significant rise from the former cap of 48 hours or six days.

The revised law introduces preemption over certain aspects of local sick leave ordinances. This implies that local authorities must strictly adhere to state law regarding these specific issues—they will not be allowed to enact or enforce rules that are more stringent or more beneficial to employees. This preemption pertains to the following provisions:

• Payout of unused sick leave at the termination of employment
• Advance of sick days to employees by employers (which have not yet been accrued)
• Requirement for employers to provide written notice about available leave
• Calculations of the rate of pay for actual sick leave taken by employees
• Employee notifications for predictable and unpredictable use of sick leave
• Timeline for employers to pay employees for utilized paid sick leave

Thankfully, local jurisdictions that have their own sick leave laws have so far been largely in sync—or at least not conflicting—with the state on these matters. Employers in these areas should not have to significantly revise their sick leave policies, beyond ensuring they offer the amount of hours now mandated by state law. Areas are not prohibited from creating and imposing more advantageous sick leave rules on issues not included in this list, such as the total number of hours accrued or permissible reasons for utilizing leave.

Business owners need to take steps to ensure compliance with the new regulations. This could involve updating payroll systems, revising employee handbooks, and preparing to provide five days of paid sick leave per year. Notably, employers cannot require employees to find replacements as this would be contravening the new law.

California’s new Paid Sick Leave benefit of five days per year is a significant increase over the previous three-day benefit, and it’s important for business owners to be aware of how it will impact their operations. By being proactive and making the necessary changes to your policies and processes, you can ensure that your business remains compliant with the law and continues to provide your employees with the support they need.

Next Steps:

1. Revise your sick leave policies to accommodate the extended hours.
2. In case your organization utilizes integrated policies (for instance, paid time off or flexible time off that encapsulates both sick leave and vacation), ensure they are at least as accommodating as the augmented sick leave requisites.
3. Disseminate the revised policies to your employees before January 1, 2024.
4. Be vigilant for an updated Paid Sick Leave poster from the California Department of Industrial Relations.

If you have any questions or need further guidance regarding these new regulations, we strongly urge you to contact HR Ledger. Our team is here to help you navigate these changes and ensure that your policies align with the updated requirements. Remember, compliance is not just a legal obligation but a way to support the well-being of our employees. Don’t hesitate—contact HR Ledger today for assistance with these changes.