As California employers, and those non-California employers with employees in California, know by now, as of July 1, 2015, such employers were required to provide paid sick leave to any employee who works 30 days or more within a year under the Healthy Workplaces, Healthy Families Act of 2014 (the “HWHFA”).

The HWHFA provides, among other things, that eligible employees are entitled to paid sick days for prescribed purposes to be accrued at a rate of no less than one hour for every 30 hours worked, or alternatively, be provided at least 3 days or 24 hours on a lump sum method. The accrual rate method imposed by the HWHFA created several challenges for employers who were already providing paid sick leave, albeit under a different accrual method, such as per pay period, per month, per week etc. To provide some flexibility to employers in complying with the HWHFA and provide further clarifications to the HWHFA, on July 13, 2015, Governor Brown signed into law AB 304 to amend the HWHFA. The amendments are effective immediately and a summary of its key provisions are as follows:

1.   An employer is now able to provide for employee sick leave accrual on a basis other than one hour for each 30 hours worked, provided that the accrual is on a regular basis and the employee will have 24 hours of accrued sick leave available by the 120th calendar day of employment, each calendar year, or each 12-month period. This means that employers no longer have the obligation to track actual hours worked (i.e., one hour for each 30 hours worked), on the condition that the employee accrues 24 hours of leave within the first 4 months of employment.

2.  An employer is able to keep their pre-January 1, 2015 paid sick leave and/or paid time off (PTO) policies as long as:

a.  these policies existed prior to January 1, 2015;

 b.  these policies provide for time off for the same purposes as specified in the HWHFA (including carry-over and use requirements);

c.  these policies continue to provide an employee paid sick leave and/or PTO on an accrual and on a regular basis so that an employee, (including an employee hired into that class after January 1, 2015):

(i)  has no less than one day (or 8 hours) of accrued paid sick leave or PTO within 3 months of each year of employment of each calendar year, or each 12-month period; and

(ii) was eligible to earn at least 3 days (or 24 hours) of paid sick leave or PTO within 9 months of each year of employment.

3.  If an employer modifies the accrual method used in the policy it had in place prior to January 1, 2015, the employer must comply with the one hour for each 30 hours worked accrual method, or alternatively, provide for the lump sum method.

4. The amendments provide for a new method for calculating the rate of pay:

a.   For non-exempt employees with different hourly rates, an employer now has an option on how to pay sick days. Paid sick time for nonexempt employees shall be calculated using either of the following two options:

(i) in the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time, whether or not the employee actually works overtime in that workweek; or

(ii) by dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.

b.  For exempt employees, paid sick time must be calculated in the same manner as the employer calculates wages for other forms of paid leave time.

5.  An employee must work for the same employer for at least 30 days in California in order to qualify for paid sick leave.

6. Employers who provide unlimited sick leave to their employees can satisfy notice requirements by indicating “unlimited” on the employee’s itemized wage statement.

7.  The provisions of the original text of the HWHFA required an employer to reinstate accrued paid sick days to returning employees within one year of termination, resignation, or separation from employment. This requirement is unchanged by the amendments. However, if an employer paid out accrued PTO to an employee upon termination, resignation, or separation from employment, an employer is not required to reinstate accrued PTO if the employee is rehired within one year.

8.  An employer no longer has the obligation to inquire into or record the purposes for which an employee uses sick leave or paid time off. However, as provided under the original text of the HWHFA, an employer is still required to keep records for three years documenting the hours worked and paid sick days accrued and used by an employee and to make those records available to the Labor Commissioner upon request.

9.  The original text of the HWHFA contained an exemption for employees in the construction industry covered by a valid collective bargaining agreement (which met certain requirements). The HWHFA previously defined “employee in the construction” to mean an employee performing onsite work associated with construction, including work involving alteration, demolition, building, excavation, renovation, remodeling, maintenance, improvement, repair work …”. (Emphasis added). The amendments removed the term “onsite”, which now broadens the exemption for employees in the construction industry because the focus is no longer on where the work is performed but rather on the work that employee is assigned to perform.

10.  For employers governed by Wage Orders 11 (Broadcasting Industry) and 12 (Motion Picture Industry), the amendments delay to January 21, 2016 the requirements that these covered employers provide to their employees written notice setting forth the amount of paid sick leave and/or PTO available on each wage statement or other document on each pay date.

While most of the provisions of the amendments are welcomed news to employers because the amendments provide some flexibility and much needed clarifications, the amendments may perhaps be a little too late especially for those employers who expended significant resources to modify their PTO policies to be compliant as of July 1, 2015.

Non-compliance with the HWHFA and its amendments carry significant liabilities, and as such, employers should consult with legal counsel to ensure their paid sick leave and/or PTO policies are compliant.