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Beginning July 1, 2015, the Healthy Workplaces, Healthy Families Act of 2014 (HWHFA) obligates employers in California to offer sick pay to nearly every category of employee. The minimum obligation is to provide sick pay at the rate of one hour for every 30 hours worked or a lump sum allocation of three days or 24 hours per year. Here are 10 tips to help ensure that your sick pay policy complies with the law.
PTO Plans Might—or Might Not—Satisfy the Obligation
A company’s existing paid time off (PTO) plan may satisfy HWHFA obligations, so long as it provides the minimum level of benefits mandated by the law.
Do not assume that simply because you offer three or more days of PTO and/or sick leave that you have complied with the law. Companies choosing to satisfy their obligations under the HWHFA through a PTO policy may need to adjust their policies in several ways. For example, your policy’s PTO accrual rate may be stingier than law’s minimum accrual rate of one hour for every 30 worked. Moreover, the PTO accrual might be measured on a per-pay period basis, rather than on a per-hour basis, potentially leading to insufficient accrual. Another deficiency may be that the PTO plan may not cover all categories of employees. Some policies may place inappropriate restrictions on employees regarding the timing and purpose of paid time off. Carefully compare each provision of the HWHFA to your existing policy to ensure that the company policy satisfies each minimum obligation.
Most Employers and Employees Are Covered
Confirm that all classes of your company’s California employees receive sick pay. The HWHFA covers large and small employers and does not have a size exemption. The law mandates benefits to all full-time, part-time, temporary, and seasonal employees who work for the company in California for 30 or more days within a year (with limited exceptions). Traditionally, many employers have limited sick pay benefits to full-time employees; this can no longer be the case in California. Note, however, that so long as the minimum benefit is provided, the company may provide more generous benefits to employees in certain job classifications.
Notify Employees of Their New Rights
The law requires employers to provide notice to their employees of sick pay rights in two ways. First, beginning Jan. 1, 2015, employers are required to post a workplace poster containing information regarding sick pay rights.
Second, employers are required to provide most employees with an individualized Notice to Employee (required under Labor Code Section 2810.5) that includes paid sick leave information. This notice should be provided to new employees upon hire and to existing employees by July 8.
Additionally, because most employers will decide to customize and qualify sick pay benefits, it is highly recommended that employers distribute an updated PTO or sick pay policy.
Think About Offering a Lump Sum Benefit
Companies may choose between policies in which leave accrues at the minimum rate of one hour for every 30 worked or offering a lump sum amount of no less than three days or 24 hours at the start of each 12-month period. The 12-month period may be based on the employee’s anniversary date, a calendar year, or any other defined 12-month period. Under this approach, no accrued hours need be rolled over into the following year.
There are pros and cons to either approach. The accrual method ensures that employees receive the benefit in proportion to hours worked throughout the year, but accounting for the accrual may be cumbersome. On the other hand, offering a lump sum of 24 hours per year avoids accounting headaches but gives employees a windfall of up-front benefits without working the hours to earn them.
Employers that opt for the accrual method should note that the law’s minimum accrual rate will cause full-time employees to earn more than eight days of sick pay per year. But employers may impose an accrual cap of 48 hours or six days. An employer may also impose an annual use cap of 24 hours or three days. An employer will need to impose these caps in a written policy to prevent a large accrual of benefits.
Recognize Very Broad Use Rights
Under the HWHFA, employees may use accrued sick pay benefits for the diagnosis, care, or treatment of an existing health condition or preventative care for an employee or an employee’s family member. Sick pay may no longer be limited to circumstances in which an employee is medically incapacitated from working. The new law permits employees to use sick pay to care for a child, parent, spouse, registered domestic partner, grandparent, grandchild, and sibling. The law also permits employees to take sick pay for the purpose of dealing with domestic violence, sexual assault, or stalking.
Consider Variable Pay
The rate of sick pay is the employee’s hourly wage. However, where the employee’s pay fluctuates, it becomes necessary to recalculate the sick pay rate. If during the 90 days prior to taking a sick day the employee had different hourly pay rates, was paid by commission or piece rate, or was a nonexempt salaried employee, then the rate of pay is calculated based on a 90-day average.
Plan to Inform Employees of Available Sick Pay Each Pay Period
Every pay day, employers must provide each employee with a statement of available sick pay. The information may either be included on the employee’s pay stub or in a separate document provided on pay day.
Any discipline associated with abuse of PTO needs to be administered with utmost care. The sick pay law prohibits retaliation against an employee for using or attempting to use sick days. The law also creates a rebuttable presumption that an employer has retaliated against an employee if the employer takes an adverse action against the employee within 30 days of the employee filing a complaint with the state, participating in an investigation, or opposing any practice prohibited by the law.
There are many additional nuances to the HWFA, and it is important for employers to be knowledgeable of the law’s intricacies and to stay abreast of new changes.
Christopher W. Olmsted is a shareholder in the San Diego office of Ogletree Deakins. Republished with permission. © 2015 Ogletree Deakins. All rights reserved.
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