Assembly Bill 304, signed on July 13, 2015, is an amendment to the Healthy Workplaces, Healthy Families Act of 2014 (HWHFA). It was an “urgency” bill, which means that it went into effect immediately upon being signed by Governor Brown. The HWHFA of 2014 was landmark legislation that extended the right of paid sick leave to an estimated 6.5 million California workers. The extension of benefits to so many workers spurred a serious discussion of the implementation of the new law and how it would affect employers.

The purpose of the urgency legislation was to provide clarification regarding which workers were covered, how paid time off accrued, and how it affected employers that already have a paid sick leave policy in place. The following is a summary of several of the most impactful provisions of HWHFA and its urgency amendments.

Eligibility:

An employee is eligible to accrue paid sick leave if he or she has worked in California for 30 days or more, for the same employer, from the commencement of employment. An employee is eligible to use accrued sick days after 90 days of employment.

Accrual Method:

The paid sick leave accrues at a rate of one hour for every 30 hours worked. An employer may use a different accrual method, so long as leave accrues on a regular basis and an employee does not accrue less than 24 hours by the 120th calendar day of employment.

Carry Over of Unused Leave:

Unused sick days shall carry over to the next year, however an employer may limit the use of an employee’s paid sick days to 24 hours or three days per year. No accrual or carry over is required if the full amount of leave (24 hours or three days) is received at the beginning of the year. An employer may limit an employee’s total accrued sick days, including carry over days, to 48 hours or six days.

Unused Leave Upon Employee’s Separation From Employment:

An employer is not required to compensate employees for unused paid sick days upon termination, resignation, retirement, or other separation from employment. However if an employee is rehired within one year of the date of separation an employer must reinstate any unused sick leave, unless the employer elected to compensate the employee for it upon separation.

Existing Paid Leave Policy or Paid Time Off Policy:

An employer is not required to give additional days under HWHFA if they already have a paid leave policy or paid time off policy in place. The employer’s policy must be available for the same purposes and under the same conditions as the leave granted under HWHFA. A policy meets this obligation if: (1) it satisfies the accrual, carry over, and use requirements of HWHFA; or (2) the policy was in place prior to January 1, 2015 and allowed an employee to accrue eight hours or one day of paid sick leave within three months of employment, or 24 hours or three days within nine months. If the employer modified the policy after the January 1, 2015 date, their policy is subject to the substantive requirements of the HWHFA.

Notice Requirements:

An employer must provide written notice informing the employee of their available paid sick leave. If the employer has an unlimited paid sick leave or paid time off policy, they can satisfy the notice requirement by indicating “unlimited” under the sick leave portion of an employee’s itemized wage statement.

Calculating Rate of Pay for Leave:

An employer may calculate the rate of paid sick leave for non-exempt employees in two ways: (1) using the regular rate of pay for the workweek in which the employee uses the paid sick time; or (2) by dividing the employee’s total wages, not including overtime pay, by the employee’s total hours worked in the previous 90 days. To calculate the rate for an exempt employee, an employer shall use the same manner used for other forms of paid leave time.

How the Amendment Affects Employers:

It clarified that the employee must work for the same employer for 30 days in order to be eligible to accrue paid sick leave. Prior to A.B. 304 there was some confusion as to how to measure the 30-day eligibility requirement for employees who had worked for other employers in the last year.
An employer may set his or her own accrual method so long as it conforms to the minimum requirements set forth in the HWHFA (accrual of no less than 24 hours by the 120th day).
It defined the “full amount of leave” as 24 hours or three days. This definition is relevant to an employer looking to bypass the accrual method by frontloading leave at the beginning of the year.
It clarified how employers can ensure compliance if they already had a paid leave policy or a paid time off policy in place prior to the HWHFA.
It clarified that an employer does not have to reinstate unused leave for an employee rehired within one year, if the employer already compensated the employee for that unused leave upon separation.
It clarified how to comply with the notice requirements, for employers that have an unlimited paid sick leave or paid time off policy.
It clarified how calculate the rate of pay for the sick leave provided to nonexempt and overtime exempt employees.