Chicago Finalizes Rules on New Paid Leave and Paid Sick Leave Ordinance

On April 30, the Chicago Department of Business Affairs and Consumer Protection (BACP) published the final rules interpreting the Chicago Paid Leave and Paid Sick and Safe Leave Ordinance (the “Ordinance”), which is set to take effect on July 1. As previously outlined, the Ordinance will replace the Chicago Paid Sick Leave Ordinance currently in effect. Under the new version of the Ordinance, Chicago employees will remain entitled to earn up to 40 hours of paid sick leave per 12-month period but also will be entitled to earn up to 40 hours of paid leave, usable for any reason, per 12-month period.

While the final rules are much more expansive than the set originally proposed in December, employers will be left wanting. The final rules do not clarify—and sometimes do not even address—some of the unresolved issues presented by the new Ordinance. Therefore, while preparing to implement their new or updated paid leave policies prior to July 1, employers should take careful note of the issues outlined below.

Definition of a 12-Month Period

The Ordinance states that “[t]he 12-month period for a covered employee shall be calculated from the date the covered employee began to accrue paid leave and paid sick leave.” The final rules take a more flexible approach, allowing employers to establish a 12-month period of the employer’s choosing. The designated 12-month period must be consecutive months such as employee’s anniversary year, the calendar year, a contract year, the fiscal year or the tax year.

Carryover of Unused Leave

Employees are entitled to accrue up to 40 hours of paid sick leave and 40 hours of paid leave in a 12-month period. Employees may carry over up to 80 hours of paid sick leave and up to 16 hours of paid leave from one 12-month period to the next. The final rules confirm that any carryover is in addition to the paid leave and paid sick leave the employee will earn in the next 12-month period.

In lieu of accruing time, employers may frontload 40 hours of paid leave and 40 hours of paid sick leave on the first day of the 12-month period. Frontloading at least 40 hours of paid leave will alleviate the employer’s paid leave carryover obligations under the law, but—as emphasized by BACP in all caps—frontloading 40 hours of paid sick leave will not alleviate the employer’s paid sick leave carryover obligations. 

Denial of Requests for Paid Leave

The Ordinance indicates that employers can require employees to obtain “reasonable preapproval” before using paid leave for the purpose of maintaining continuity of business operations. The final rules instruct employers that such a denial should consider relevant factors such as:

• Whether granting paid leave during a particular time period would significantly impact business operations.
• Whether the employer provides a need or service critical to the health, safety or welfare of the people of Chicago.
• Whether similarly situated employees are treated the same for the purposes of reviewing, approving and denying paid leave.
• Whether the employee has meaningful access to use all their paid leave over the 12-month period.

The rules go on to suggest that a policy with some blackout dates may be a permissible restriction on use so long as the employee still has a reasonable ability to use their time over the course of the 12-month period. However, as an example of an over-restrictive policy, the rules outline one where paid leave is only usable on Tuesdays, Wednesdays and Thursdays.

The final rules require that denial of paid leave requests must be in writing, include the pre-established policy rationale for the denial, and be issued to the employee immediately. 

Using Paid Leave and Paid Sick Leave

The final rules include a new provision that allows employers to restrict use of paid leave or paid sick leave to the employee’s regular workweek, which means that employees may be prevented from accessing their otherwise available paid leave or paid sick leave during scheduled mandatory overtime or on weekends.

Using PTO Policies for Compliance

Unlike the Illinois Paid Leave for All Workers Act, the Ordinance does not contain any exemptions for pre-existing paid leave policies. Therefore, if an employer uses a more generous PTO policy for compliance with both the paid leave and paid sick leave components of the law, it must comply with the Ordinance in all relevant respects—for example, the shorter, 30-day use waiting period for paid sick leave must apply to the policy instead of the 90-day use waiting period for paid leave.

Rate of Pay

Under the Ordinance, employees must receive their regular rate of pay when using paid sick leave and paid leave, which includes continuing health care benefits if the employee receives health care benefits from their employer. The regular rate of pay for nonexempt employees will be calculated by dividing the employee’s total wages by total hours worked in full pay periods of the prior 90 days of employment. Wages do not include overtime pay, premium pay, tips or gratuities or commissions.

Employers will be disappointed to learn that the final rules do not provide any guidance on this 90-day calculation.

Employer Paystub, Notice and Posting Requirements

Under the Ordinance, as modified through the final rules, employers must satisfy the following notice requirements:

• Notice/workplace poster: Post the city-created notice through the employer’s usual methods of communication for such notices, whether by paper posting or electronic dissemination through the employer’s internal communication channels. Per the final rules, employers must post the notice in other languages if at least 5 percent or more of employees at a jobsite are not literate in English.
• New hire notification:

        1) Provide a notice with the first paycheck subject to the Ordinance or—per the final rules—prior to the commencement of the employee’s employment or as part of an onboarding process.

        2) Provide written notice of the employer’s paid leave and paid sick leave policies at the commencement of employment.

• Annual frontloading notice: Per the final rules, if an employer chooses to frontload time in lieu of accrual, the employer must make written notification of the fact and the availability of hours to an employee at the beginning of the 12-month period. The rules do not clarify whether this notice requirement can be satisfied vis-à-vis providing the employer’s written paid leave policy, or if it requires affirmative notification to the employee of their particular frontloaded benefits.
• Annual employee notification: Provide a notice annually with a paycheck issued within 30 days of July 1. Per the final rules, the annual notice may be provided by paper or electronic means through the employer’s internal communication channels.
• Policy: Establish reasonable written paid leave and paid sick leave policies which include advance notice procedures and the basis for denial of paid leave requests. Per the final rules, the policies may be part of a manual, handbook or separate document. 
• Changes to employer policy:

        1) Provide at least five calendar days’ written notice to employees before any change to paid leave policy notification requirements.

        2) Provide at least 14 days’ advance written notice to employees if a policy change will affect their right to final compensation for such leave.

• Available paid leave notification: Provide a notification to employees of the availability and use of paid leave and paid sick leave. Reasonable systems for notification include listing amounts on paystubs or payroll statements, developing an online system where employees can access such information, or—per the final rules—providing a handwritten record of available time.

With the Ordinance taking effect soon, employers should start making decisions about the best way for their business to comply with these new requirements.

Stephanie L. Mills-Gallan is an attorney with Littler in Milwaukee. Jeff Nowak and Meg Karnig are attorneys with Littler in Chicago. © 2024 Littler. All rights reserved. Reposted with permission.