On January 1, 2024, virtually every employer in Illinois will face new obligations to provide paid leave to their employees.

As we explained earlier this year, the state enacted the Paid Leave for All Workers Act (the “Illinois Act”), requiring employers to give their Illinois employees up to 40 hours of paid time off (PTO) for any reason in a 12-month period. Although the Illinois Department of Labor (IDOL) has issued some Frequently Asked Questions (FAQs) to assist employers in complying with the Illinois Act, the guidance is still evolving, and the IDOL’s proposed regulations won’t be finalized until at least March 2024, more than two months after employers must start complying.

To complicate things, although the Illinois Act exempts any employer that is covered by any already existing local paid leave law, the two major jurisdictions that have such laws—Cook County and the City of Chicago—recently overhauled their ordinances. The changes will align the local law in Cook County closely—but not exactly—with the Illinois Act. However, Chicago employers will face the most complex paid leave mandate in the nation. The interaction among these paid leave laws will make compliance more complicated, and employers should be ready to address these changes in the new year. There are many ambiguities in these laws, and the plaintiffs’ bar can be expected to push for aggressive, pro-employee interpretations. Accordingly, employers will have to monitor court decisions in this area in the coming years.

The good news in all of this is that most employers already provide their full-time employees with sufficient PTO and/or paid sick time to satisfy these statutory leave obligations. However, these new laws will impose expensive new leave obligations for many part-time or temporary employees (who would otherwise not be entitled to such leave) and very complicated administrative burdens as to all employees. Hence, these new laws are potential litigation landmines.

Chicago’s Amended Paid Leave Ordinance

On November 9, 2023, the Chicago City Council adopted an ordinance that, among other things, includes the “Chicago Paid Leave and Paid Sick and Safe Leave Ordinance,” a highly detailed law imposing significant new leave obligations on employers with employees in Chicago that had been set to take effect December 31, 2023. However, in response to the local business community’s criticism, the City Council acted again on December 13, 2023, unanimously approving a substitute ordinance that modified the November ordinance, both by changing certain substantive provisions and by delaying its effective date to July 1, 2024 (the “Modified 2023 Chicago Ordinance”). Until the Modified 2023 Chicago Ordinance goes into effect on July 1, 2024, Chicago employers will remain subject to the existing (unamended) Chicago Paid Sick Leave Ordinance and its obligation to provide employees one hour of paid sick leave for every 40 hours worked up to 40 hours per 12-month period.

The Modified 2023 Chicago Ordinance will require nearly every Chicago employer to provide “Covered Employees” with both “Paid Leave” (i.e., leave that can be used for any reason) and “Paid Sick Leave” (i.e., leave that can only be used for medically needed reasons), totaling as much as 80 hours per year. On December 21, 2023, the Chicago Department of Business Affairs and Consumer Protection (BACP) Office of Labor Standards published its own FAQs, an informational flyer, and proposed rules. BACP will accept public comments on the proposed rules until February 16, 2024, and it is important to note that, while the proposed rules provide a window into how the enforcement agency reads the new law, they are not yet a definitive interpretation.

Covered Employees

The Modified 2023 Chicago Ordinance retains the definition of “Covered Employee” stated in the Chicago Paid Sick Leave Ordinance: “an Employee who works at least 80 hours for an Employer within any 120-day period while physically present within the geographic boundaries of the City.”

Although the Modified 2023 Chicago Ordinance generally applies only to employees as distinguished from independent contractors (as determined pursuant to Internal Revenue Service guidelines), it covers all domestic workers, “regardless of whether they work as employees, independent contractors, sole proprietors, or partnerships.” However, the Modified 2023 Chicago Ordinance excludes federal railway employees, construction industry employees covered by a collective bargaining agreement (CBA), or other employees covered by a CBA entered into on or before July 1, 2024. The requirements of the Modified 2023 Chicago Ordinance can be waived by clear and unambiguous terms in a CBA entered into after July 1, 2024.

The Modified 2023 Chicago Ordinance gives employers the option of providing Paid Leave and Paid Sick Leave on an accrual basis, front-loading the time, or offering unlimited PTO and establishes various carryover requirements for accrued leave.

Accrual and Carryover

Starting July 1, 2024, or on the first calendar day of employment that begins after July 1, 2024, Covered Employees will accrue one hour of both Paid Leave and Paid Sick Leave, i.e., two hours total, for every 35 hours worked in Chicago. This rate is a change to the city’s existing paid sick leave law’s requirement to accrue one hour for every 40 worked, and Chicago employers will need to adjust for the faster accrual rate starting July 1, 2024. Employees who are exempt from overtime, i.e., those who are not paid on an hourly basis, are “assumed to work 40 hours in each workweek for purposes of Paid Sick Leave and Paid Leave accrual,” unless their normal workweek is less than 40 hours, in which case the PTO accrues based on the employee’s normal workweek.

The modified 2023 Chicago Ordinance caps accruals at 40 hours of Paid Leave and 40 hours of Paid Sick Leave per 12-month period, calculated from when leave first begins to accrue, though employers may set a higher limit. At the end of each 12-month accrual period, employees must be allowed to carry over at least 16 hours of accrued unused Paid Leave and 80 hours of accrued unused Paid Sick Leave into the next 12-month accrual period. Because the Modified 2023 Chicago Ordinance caps accruals at 40 hours of Paid Leave and 40 hours of Paid Sick Leave per 12-month period, we interpret the provision regarding annual carryover (i.e., 16 hours of Paid Leave and 80 hours of Paid Sick Leave) as a cap on what must be carried over, and we do not interpret this as requiring employers to allow employees to stack up and carry forward greater amounts of Paid Leave or Paid Sick Leave. However, absent guidance on this issue, it may become a subject of litigation.

Front-Loading and Carryover

In lieu of accrual, the Modified 2023 Chicago Ordinance permits employers “to choose to immediately grant Covered Employees 40 hours of Paid Leave or 40 Paid Sick Leave or both” on the first day of employment or the first day of the subsequent 12-month accrual periods. Employers who front-load Paid Leave are not required to carry over an employee’s unused Paid Leave to the subsequent 12-month period. Up to 80 hours of unused Paid Sick Leave must still be carried over to the subsequent year, however.

One of the many ambiguities in the Modified 2023 Chicago Ordinance is what it means to “grant” leave in advance. Although not yet final, BACP’s proposed “Rule PTO 2.04” conflates the word “grant” with the common term “front-load” and further states that hours granted by front-loading will be understood to be included in any reference to “accrued” hours.

Unlimited PTO

In lieu of accruing or front-loading the statutory amount of Paid Leave and Paid Sick Leave and providing carryover, employers may instead choose to provide employees with unlimited PTO, which may be used for any reason. Carryover requirements do not apply to employers that grant unlimited PTO. However, unless otherwise provided in a CBA, the employer would be required to pay separating employees the monetary equivalent of 40 hours of PTO, minus the hours of PTO used by the employee in the last 12-month period before the employee’s date of separation from employment, as part of the employee’s final compensation. Employers implementing unlimited PTO will need to keep a record of employees’ PTO use to ensure accurate calculation of any required payout. Because of the reduced overall paperwork burden associated with an unlimited PTO policy (i.e., no need to separately track carryover of leave), and because of the reduced risk of litigation stemming from inadvertent violations of the Modified 2023 Chicago Ordinance, unlimited PTO policies—for exempt employees—may be an attractive option for some employers. However, such policies are impractical for non-exempt employees for various reasons.

Leave Usage

Employees can use Paid Sick Leave 30 calendar days after beginning employment and Paid Leave 90 days after beginning employment. Employees may choose whether to use Paid Sick Leave or Paid Leave before using any other leave provided by the employer or required by city, state, or federal law.

Paid Leave and Paid Sick Leave must be compensated at the same rate and with the same benefits that the Covered Employee regularly earns, paid on the usual payday after the leave was taken. Paid Leave may be used for any reason, while Paid Sick Leave may be used when:

the employee or employee’s family member suffers an illness or injury or needs professional care, including preventive care, diagnosis, or treatment of a medical, mental, or behavioral issue, including substance abuse disorders;

the employee or employee’s family member is a victim of domestic violence, sexual assault, or stalking;

an employee’s place of business or a family member’s school, class, or place of care closes due to a public health emergency; or

the mayor, the governor, the public health department, or a health care provider requires the employee to isolate or quarantine to minimize transmission of a communicable disease.

Employers are prohibited from interfering with, denying, or changing an employee’s schedule to avoid providing Paid Leave or Paid Sick Leave or count PTO as an absence that triggers discipline, discharge, demotion, suspension, or any other adverse action unless permitted notification requirements are violated. Employers may, however, discipline employees who take Paid Sick Leave for purposes other than those permitted under the law and may require certification for more than three consecutive Paid Sick Leave days. In addition, employers may require up to seven days’ notice for foreseeable Paid Sick Leave (e.g., for scheduled medical procedures), as well as for Paid Leave, and as soon as practicable for unforeseeable leave.

Employers are permitted to set minimum increments for paid leave usage of up to four hours per day for Paid Leave and two hours per day for Paid Sick Leave. They may not require employees using either type of leave to search for or find a replacement to cover their hours.

Payout Requirements

A unique feature of the Modified 2023 Chicago Ordinance is that, while payout at termination is not required for Paid Sick Leave, employers with more than 50 Covered Employees will be required to pay an employee for unused Paid Leave upon that employee’s separation from employment or whenever a transfer of the employee results in the employee’s loss of status as a Covered Employee (e.g., transfer to another state). The amount that must be paid out depends on the size of the employer:

employers with 101 or more Covered Employees (“large” employers) must pay out all unused accrued Paid Leave once the Modified 2023 Chicago Ordinance takes effect (i.e., beginning July 1, 2024);

employers with 51 to 100 Covered Employees (“medium” employers) must pay out up to 16 hours of unused Paid Leave accruals starting July 1, 2024, until July 1, 2025; thereafter, employers will be required to pay out all of the employees’ accrued Paid Leave; and

employers with 50 or fewer employees (“small” employers) are not required to pay out unused, accrued Paid Leave at termination.

In addition, a Covered Employee who has not received a work assignment for 60 days may request a payout of unused Paid Leave.

Payout entitlements may not be contractually waived or forfeited except by a CBA. Moreover, the payout entitlements under the Modified 2023 Chicago Ordinance do not limit other employer obligations regarding final compensation as set forth in the Illinois Wage Payment and Collection Act and its regulations, which require the payout at termination of all unused earned PTO (unless otherwise provided in a CBA). Accordingly, notwithstanding the provisions in the Modified 2023 Chicago Ordinance providing that medium-sized employers need not pay out all accrued but unused Paid Leave, and that small employers need not pay out any unused, accrued Paid Leave at termination, employees may assert claims to such payouts under the Illinois Wage Payment and Collection Act.

Administrative Requirements

Notice and Posting

Employers must post a notice (published by BACP) summarizing employees’ rights under the Modified 2023 Chicago Ordinance in a conspicuous place at each of its business facilities (if any) within the geographic boundaries of Chicago. If the employer’s workforce includes a significant portion of non-English speakers, the employer also will be required to post a notice in the Covered Employees’ primary language(s), which the BACP will also provide.

Moreover, new hires must receive written notice of their rights to paid leave under the Modified 2023 Chicago Ordinance with their first paycheck; BACP is to provide a compliant form notice. Thereafter, employees must receive written reminders annually with a paycheck issued within 30 days of July 1, similar to (and along with) mandatory annual minimum wage notices.

Additionally, an employer of a Covered Employee who has not been offered a work assignment for 60 days must provide written notice to that employee advising that the employee has a right to request a payout of accrued, unused Paid Leave.

Distribution of Written Policy

In addition to posting the BACP’s notice(s) once issued, employers must provide Covered Employees with a written PTO policy that provides an explanation of the employer’s PTO notification requirements (so that the employee understands what they must do in order to use such PTO). This policy must be provided to all employees at the commencement of employment. If such policy is modified, the new policy must be delivered, in writing, to employees “within five calendar days before any change” is implemented, except that a change to PTO policies that affects an employee’s right to final compensation must be disclosed with at least 14 days’ notice.

Notice of Leave Usage

Employees must receive written notification of currently available Paid Leave and Paid Sick Leave each time wages are paid, with details regarding accruals as well as any usage. Such notification may be delivered on a pay stub, via an online portal, or using any other “reasonable system” that provides a full accounting of accruals, usage, and available leave.

Recordkeeping

Employers must retain detailed records relating to paid leave for at least five years. In addition, if a claim, investigation, or litigation is pending, related records must be retained for the duration thereof.

Enforcement Provisions

For violations of the Modified 2023 Chicago Ordinance, employers may be fined between $1,000 and $3,000 for each separate offense, except that the fine is set at $500 for the first notice and posting violation and $1,000 for any subsequent notice and posting violation. What constitutes a “separate offense” or a separate “notice and posting violation” is not defined.

In addition, as has been the case under the existing Chicago Paid Sick Leave law, the Modified 2023 Chicago Ordinance provides a private right of action. Beginning on July 1, 2024, for Paid Sick Leave violations and July 1, 2025, for Paid Leave violations, employees who prevail in a civil suit may recover:

treble damages for unpaid or denied leave,

interest at the prevailing rate, and

reasonable attorneys’ fees and costs.

Until July 1, 2026, no civil action may be commenced upon the occurrence of an alleged violation of the Paid Leave requirements until after an additional pay period or 16 days has passed, whichever is less. This provision is described by BACP as a “Cure Period,” but it is not clear (yet) whether an employer is entitled to notification about the alleged violation as a trigger to the opportunity to cure. On July 1, 2026, the provision allowing the opportunity to cure will sunset, and actions will be permitted to commence immediately upon an alleged violation of the Paid Leave or Paid Sick Leave requirements.

Illinois Paid Leave for All Workers Act

While extensive details of the Illinois Act taking effect on January 1, 2024, are explained here, below are some of the Illinois Act’s key points.

The Illinois Act does not apply to employees who are covered by the Chicago and/or Cook County paid leave laws.

Eligible employees will earn 40 hours of paid leave every 12-month period at a rate of one hour for every 40 hours worked and will be able to use their accrued paid leave for any purpose.

Accruals not used by an employee must carry over annually (with no limit on the amount of leave to be carried over from year to year), even though employers will not be required to allow usage of more than 40 hours of paid leave per year unless they choose to do so. However, employers can avoid this carryover requirement by front-loading the full amount of an employee’s anticipated paid leave accruals at the start of the year, which can be any 12-month period of the employer’s choosing. In such cases, employers may impose a “use it or lose it” policy, requiring employees to forfeit any accruals that remain unused at the end of the appliable 12-month period.

Employees may begin using paid leave on March 31, 2024, or 90 days after beginning employment, whichever is later.

Payout of leave at termination is not required unless leave provided under the Illinois Act is credited to an employee’s vacation or other PTO account. In other words, if paid leave under the Illinois Act is separately tracked and separate from the employee’s vacation or other PTO account, it need not be paid out at termination. If, however, an employer maintains a single account of PTO for an employee and does not distinguish between leave provided under the Illinois Act and leave provided under the employer’s policy, then the amount of leave attributable to the Illinois Act must be paid out at termination.

The Illinois Act does not apply to:

“employees,” as defined in the Railroad Unemployment Insurance Act or the Railway Labor Act;

students enrolled in and regularly attending a college or university that is also their employer;

higher education institution employees employed for less than two consecutive calendar quarters during a calendar year who do not have a reasonable expectation of being rehired;

school districts organized under the Illinois School Code;

park districts organized under the Illinois Park District Code;

construction industry employees covered by a CBA;

employees covered by a CBA with an employer providing delivery, pickup, and transportation services for parcels, documents, and freight; and

employers covered by an existing municipal or county ordinance requiring paid leave or paid sick leave as of the Illinois Act’s effective date (i.e., employers in Chicago or in a municipality in Cook County that has not opted out of its leave law).

Upon its being published, employers must conspicuously post the IDOL’s Paid Leave for All Workers notice and must provide the notice on the later of the beginning of employment or within 90 days of the Illinois Act’s effective date of January 1, 2024 (the IDOL publishes mandatory downloadable posters on its website).

Employees who believe their employer violated the Illinois Act may file a complaint with the IDOL within three years after the alleged violation and may be entitled to recover:

actual underpayment;

compensatory damages;

payment to the employee between $500 and $1,000;

attorneys’ fees;

expert witness fees and other costs; and

other appropriate equitable relief.

In addition to potential liability to employees, employers that violate the Illinois Act are subject to civil penalties of $2,500 for each separate offense.

Comparing the Illinois Act with the Modified 2023 Chicago Ordinance

One of the biggest differences between the Illinois Act and the Modified 2023 Chicago Ordinance is that Chicago requires not only the accrual of paid leave that can be used for any reason but also the accrual of paid sick leave. Further, the accrual rates are different: Chicago requires one hour accrued for every 35 hours worked, while Illinois requires one hour accrued for every 40 hours worked. Moreover, Chicago requires accrual of both types of leave every period, for a total maximum accrual of 80 hours of total PTO, double the amount available under the Illinois Act.

Additionally, unlike the Modified 2023 Chicago Ordinance (or the Cook County Ordinance discussed below), the Illinois Act does not provide a private right of action for an employee. Rather, employees only may file a complaint with the IDOL.

Cook County to (Mostly) Align with State Law

In addition to all of the above, Cook County has also jumped into the fray. On December 14, 2023, the county’s Board of Commissioners unanimously passed an amendment to the existing Cook County Earned Sick Leave Ordinance (as amended, the “2023 Cook County Ordinance”), essentially rewriting the law to align with the Illinois Act, with two significant exceptions. The 2023 Cook County Ordinance provides (1) a private right of action and (2) a carve-out to keep leave benefits available to certain delivery and airline workers.

Although the 2023 Cook County Ordinance becomes effective December 31, 2023, according to the Cook County Commission on Human Rights, the enforcement agency for the 2023 Cook County Ordinance, enforcement will not begin until February 1, 2024. As of this writing, the commission has not issued proposed regulations or FAQs.

Notably, the 2023 Cook County Ordinance does not apply to Chicago employers due to Chicago’s home rule powers and the existence of its own local paid leave law. Other home rule municipalities have the right to opt out of county ordinances, and, when paid sick leave was first enacted by Cook County, most did so. As of August 15, 2023, only 22 of Cook County’s 134 localities were participating. Now, municipalities will have to affirmatively opt out of the 2023 Cook County Ordinance. Until Cook County municipalities choose to do so, employers in all municipalities within Cook County (outside of Chicago) will be subject to the 2023 Cook County Ordinance. And should Cook County municipalities choose to opt out, they would then be subject to the Illinois Act and its “paid leave for any reason” obligation. Accordingly, we do not expect significant numbers of Cook County municipalities will elect to opt out.

The 2023 Cook County Ordinance, like the Modified 2023 Chicago Ordinance, contains a private cause of action and similarly provides for the recovery of treble damages, interest, and attorneys’ fees.

Covered employees who work in Cook County will be entitled to earn and use up to a minimum of 40 hours of paid leave during a 12-month period, or a pro-rata number of hours of paid leave for any purpose, for paid leave taken in accordance with the provisions of the 2023 Cook County Ordinance. The leave must accrue at the minimum rate of one hour of paid leave for every 40 hours (or single workweek) worked (prorated for part-time employees), which aligns with statewide requirements but differs from Chicago’s more generous accrual of one hour for every 35 hours worked (starting on July 1, 2024).

What Employers Should Do Now

All employers of employees in Illinois should do the following:

Based on each employee’s work location, determine which (if any) of the laws apply to the employee, keeping in mind that only one jurisdiction’s law applies to each employee, with the general order of application being as follows:

the Modified 2023 Chicago Ordinance applies to Covered Employees in Chicago;

the 2023 Cook County Ordinance applies to covered employees working in municipalities that have not opted out (and who do not work in Chicago);

if a local ordinance of a Cook County municipality that has opted out provides equivalent or better leave than the Illinois Act, the opted-out municipality’s ordinance will apply to covered employees; and

the Illinois Act applies to all other covered employees.

Review and revise PTO policies to comply with the applicable local ordinances and the Illinois Act, which may require adding “local practices” provisions if the employer’s workforce is located in more than one Illinois jurisdiction. Distribute the written policy as required and retain employee acknowledgments confirming receipt of the policy.

Consider whether to adopt an unlimited PTO policy for exempt employees to simplify leave administration and reduce claims exposure for inadvertent violations of leave laws. Such policies should be thoughtfully crafted, with recordkeeping obligations in mind.

Post all required notices (once issued), add required notices to new hire paperwork, and distribute notices annually, as required.

Train human resources and payroll administrators of any Illinois employees before January 1, 2024, on:

each of the laws their employees are covered by and their similarities and differences;

timekeeping policies for accrual and carryover of paid leave and/or sick leave; and

preserving records documenting hours worked, the amount of paid leave accrued and taken, and the remaining paid leave balance for each employee.

Consider any production or scheduling changes that may become necessary as more employees begin to take time off, often without advance notice.