Should California Employers Frontload or Accrue Paid Sick Leave?

Frontloading California’s new paid sick leave amount for employees may be easier and less time-consuming than using the accrual method. But which 12-month period should employers use if frontloading—the calendar year or anniversary year? Here are factors to consider.

Under the amended Healthy Workplaces, Healthy Families Act, effective Jan. 1, California employers must provide at least five days or 40 hours of paid sick leave per year, whichever is greater.

“The cost of living in California is high, and there are some parents who cannot afford to take a day off with no pay” to care for a sick child, said Mellissa Schafer, an attorney with Hinshaw & Culbertson in Los Angeles. “After the pandemic, it is not surprising to see that California expanded the paid sick leave from three days to five days.”

Accrual or Frontloading Methods

California employers can choose how they provide paid sick leave to employees from the following options:

Statutory accrual method. Employees are provided with at least one hour of paid sick leave for each 30 hours worked on an accrual basis beginning on the first day of employment. For example, an employee working 40 hours per week would accrue 1.33 hours of paid sick leave each week.

Other accrual methods. Employers may implement accrual methods other than the one above as long as the accruals are earned on a regular basis and the employee has accrued no less than 24 hours or three days’ paid sick leave within 120 calendar days from the date of hire, and 40 hours or five days of paid sick leave within 200 calendar days from the date of hire.

Frontloading a lump sum. Employers can provide a lump sum of at least 40 hours or five days of sick leave up front—“frontloading”—at the beginning of each 12-month period. New hires must be provided with at least 24 hours or three days of the lump sum within 120 days from their date of hire and the remaining 16 hours or two days by the 200th day of employment. Employers can use an employee’s anniversary date, calendar year or another period when defining the 12-month period. For example, an employer can provide employees with a lump sum of 40 hours or five days of paid sick leave on the anniversary of their hire date each year.

An existing paid-time-off (PTO) policy. Existing policies for paid leave are acceptable, whether separate vacation and sick leave banks or a combined PTO policy, if the policy provides for the minimum amount of leave required by law and the employee can use the paid leave for the purposes defined in the law.

Employees must be permitted to carry over unused leave each year. However, employers may choose to cap an employee’s total accrual at 80 hours or 10 days of paid sick leave. Lump sum policies are not required to allow carryover.

Advantages and Disadvantages of Frontloading

The main advantage of frontloading paid sick leave is that employers are not required to carry over unused paid sick leave to the following year, said Pascal Benyamini, an attorney with Faegre Drinker in Los Angeles. Another advantage is that employers don’t have to deal with the burden of tracking accruals of paid sick leave, he noted.

The main disadvantage of frontloading is that it can lead to potential abuses by employees who take all their paid sick leave at once, he said.

If employees use all of their paid sick leave early in the 12-month period, they then may want to take unpaid time off, said Jennifer Shaw, an attorney with Shaw Law Group in Sacramento, Calif.

There are also disadvantages to choosing to award paid leave in full at the beginning of the calendar year. If numerous employees use leave early in the year, there could be multiple overlapping absences, said Travis Jang-Busby, an attorney with Blank Rome in Los Angeles.

Nonetheless, most employers that frontload paid sick leave use the calendar-year method, Shaw said.

“That way, everyone is on the same schedule,” she said. “It means, though, that if someone is hired in July and the employer uses the frontload method, they will get 40 hours on July 1, for example, and 40 more on Jan. 1. But then they are on the regular schedule.”

Shaw said that electronic timekeeping helps manage different schedules, which are encountered when employers use the anniversary-date method. She added that using the anniversary date when frontloading paid sick leave can prevent the “double-dipping” that’s possible with the calendar-year method. If someone is hired in July and the employer frontloads paid sick leave using the anniversary-date instead of the calendar-year method, they get 40 hours on July 1, for example, and do not receive 40 more until the following July 1, rather than 40 more as soon as Jan. 1.

However, Jasmina Aragon, an attorney with Dykema in Los Angeles, said that using the anniversary dates “may prove a daunting task and an administrative nightmare” for large workforces.

She said that factors employers should consider when deciding which date to use include:

• Size of the workforce.
• Attrition rate.
• Timekeeping system and/or software used to track paid sick leave.

Responding to Sick Leave Abuse

If paid sick leave abuse is widespread, an employer may want to consider using the accrual method because it allows carryover of the leave into the following year, Schafer said. Employees would be less likely to fraudulently use sick leave they might be “losing.”

“When deciding whether to use the accrual method or the frontloading method,” said Ann Marie Zaletel, an attorney with Seyfarth in Los Angeles, “it is critical that a California employer first determine whether all applicable California paid sick leave ordinances permit use of the frontloading method and, if yes, the implications of using the frontloading method under the applicable ordinances.”