CALIFORNIA PAID SICK LEAVE AND CFRA REGULATIONS: ARE …

CALIFORNIA PAID SICK LEAVE ANDCFRA REGULATIONS:ARE YOU READY TO COMPLY?

© 2015 Morgan, Lewis & Bockius LLP

ARE YOU READY TO COMPLY?Barbara J. Miller

Melinda S. Riechert

April 14, 2015

PAID SICK LEAVEPAID SICK LEAVE

What Is Vacation?

• Paton v. Advanced Micro Devices, 197 Cal. App. 4th 1505 (2011)

– Vacation time accrues in proportion to length of service

– Not conditioned upon the occurrence of any event or situation

– Does not impose conditions on the employee’s use of the time

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Why Does It Matter?

• Labor Code Section 227.3

Unless otherwise provided by a collective-bargaining agreement,whenever a contract of employment or employer policy provides for paidvacations, and an employee is terminated without having taken off hisvested vacation time, all vested vacation shall be paid to him as wagesat his final rate in accordance with such contract of employment oremployer policy respecting eligibility or time served; provided, however,employer policy respecting eligibility or time served; provided, however,that an employment contract or employer policy shall not provide forforfeiture of vested vacation time upon termination. The LaborCommissioner or a designated representative, in the resolution of anydispute with regard to vested vacation time, shall apply the principles ofequity and fairness.

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Vacation – No Forfeiture

• Collective bargaining agreement (CBA) exception

– Must be clear and unambiguous

– Must state that rights under statute are waived

• Vacation is established by contract or policy, but

– Suastez v. Plastic Dress-Up – vacation accrues as employee works regardlessof contract

– Waiting periods at the beginning of employment are permissible if real

– Pro rata amount in final pay period

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Vacation – No Forfeiture

• Once earned, vacation must be paid or taken

– No forfeiture is permitted

• If paid on termination, vacation must be paid at final rate

– Cannot reduce final rate just before termination

• If advanced, cannot unilaterally advance from final pay

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Vacation – Equity and Fairness

• Labor Commissioner applies principles of equity and fairness

– Cannot force employees to take vacation without reasonable notice

– Until 2005, nine months

– Current enforcement position likely 90 days or one quarter

– Cannot impose a cap that does not permit reasonable time to use accruedvacation before accrual stops

– Vacation caps– Vacation caps

– Policy changes

– Imposition of new caps

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No Vacation Policies

• No vacation/unlimited vacation

– Primarily works for higher-level, exempt employees

– Receive salary regardless of how much time off

– Set performance/productivity standards/expectations

– Challenges

– Leaves of absence – cannot discriminate

– How much consecutive time off

– Coordination with new sick leave law

– Cannot be a disguised vacation policy

– Difficult to set standard or maximum amount

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Sick Leave

• Paid time off (PTO) for illness of the employee or a family member is notvacation

– It is conditioned on a specific event

– Provided for a specific purpose

• Time off for illness or any other purpose is vacation

• Benefit is defined by contract• Benefit is defined by contract

• Much more flexibility because the provisions of Labor Code section 227.3do not apply

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AB 1522Healthy Workplaces, Healthy Families Act

• The Healthy Workplaces, Healthy Families Act of 2014 (AB 1522)

• Effective July 1, 2015, employers must provide at least 24 hours or 3days of paid sick time to almost all current and new employees (exceptfor limited exceptions)

– Greater of 24 hours or 3 days (but employee may be able to accrue more)

– Alternative workweeks – may be more than 24 hours

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• Who is covered?

– An employer that employs one or more persons in the State of California formore than 30 days in a year is required to provide sick leave.

• Track:

– Employees outside California who travel to California to perform work for morethan 30 days in a year.

– Intermittent workers (part-time, temporary) as to when they trigger the 30-– Intermittent workers (part-time, temporary) as to when they trigger the 30-day requirement. Cannot exclude such workers from coverage.

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• Limited exceptions for employees not covered by the new law are:

– Employees covered by a valid CBA that provides paid leave and has otherrequired provisions

– Employees in the “construction industry” covered by a valid CBA

– Providers of in-home supportive services

– Flight deck or cabin crew members of air carriers if they receive equivalentPTOPTO

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• What must employers provide?

• Two methods: accrual and lump sum advance

• Problem – what is a day?

– Exempt employees – 8 hours per day and 40 hours per week

– Hourly employees?

– Alternative workweek election – hours provided by election– Alternative workweek election – hours provided by election

– Part time?

– Regularly scheduled more than 8 hours?

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• Accrual

– An employee accrues paid sick time at the rate of 1 hour for every 30 hoursworked

– Query: is lesser accrual permitted?

– The employer may prohibit use until the employee completes 90 days ofemployment.

– May limit use to 3 days or 24 hours in each year of employment (whichever is– May limit use to 3 days or 24 hours in each year of employment (whichever isgreater).

– Accrued sick days must carry over to the following year of employment, butan employer can cap an employee’s total accrual to 6 days or 48 hours (butthink about whether to limit use).

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Accrual

• The Company currently offers five paid sick days a year and 12 PTOdays. Both sick and PTO accrue per pay period over a year. In the firstyear, accrual starts after 90 days of employment. Temporary employeesand employees who are normally scheduled less than 30 hours per weekare not covered. Must the Company change its policy?

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• Lump Sum Advance

– Employers may provide three days of paid sick leave in a lump sum at thebeginning of each year to employees. (Need to define “year,” e.g., calendar.)

– No carryover of sick days is required.

– Unclear how to implement lump sum advance in year one or in the year anemployee starts work.

– Unclear whether pro rata lump sum is permitted in the first year– Unclear whether pro rata lump sum is permitted in the first year

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Lump Sum Example

• The Company provides five sick days per year that are given at thebeginning of each calendar year. During the first year of employmenteach employee receives a number of sick days based on when theemployee starts work – if the employee starts during the first sixmonths, the employee gets four days; if during the last six months, theemployee gets two days. Temporary employees are not eligible, andpart-time employees receive pro rata amounts of sick leave. Must thepart-time employees receive pro rata amounts of sick leave. Must thecompany make changes to its policy to comply with the new law?

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• For both Accrual and Lump Sum Advance

– No requirement to provide compensation to an employee for unused paid sickdays upon separation from employment unless otherwise provided by law orpolicy, e.g., PTO policies.

– Employees who separate from employment and are rehired within one yearmust have unused paid sick leave banks reinstated and be allowed to usethem immediately. (Law is unclear, but we assume that there is no obligationthem immediately. (Law is unclear, but we assume that there is no obligationto reinstate if paid out!)

• Detail: If you have a more generous sick or PTO policy, make sure theaccrual matches the new law’s requirement.

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• Permitted uses: Broad, and will require changes to most policies

– For employee’s own need or for that of a “family member” for:

– Diagnosis, care, or treatment of an existing health condition; or

– Preventive care

– Family member: A biological, adopted, or foster child, stepchild, or legal ward,or a child to whom the employee stands in loco parentis; a biological,adoptive, or foster parent, step-parent, or legal guardian of any employee oradoptive, or foster parent, step-parent, or legal guardian of any employee orthe employee’s spouse or registered domestic partner, or a person who stoodin loco parentis when the employee was a minor; a spouse or registereddomestic partner; a grandparent; a grandchild; or a sibling

– For an employee who is a victim of domestic violence, sexual assault, orstalking

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• Employer control over use:

– Employer may set a reasonable minimum increment, not to exceed two hours,for the use of paid sick leave

– No regulation or guidance on whether an employer can requestdocumentation—an “oral request” for leave is sufficient (Presumably noconflict with other laws such as Family and Medical Leave Act (FMLA) andCalifornia Family Rights Act (CFRA))California Family Rights Act (CFRA))

– Employers can require notice of paid sick time when foreseeable, but theycannot punish employees who take time off that is not foreseeable becausethe statute prevents retaliation

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• How sick leave is paid:

– Must pay sick leave taken by an employee no later than the payday for thenext regular payroll period.

– Assumed that exempt employees work 8 hours a day

– Alternative workweek – a day can be longer than 8 hours

– Different hourly rate for piece-rate or commissioned employees

– rate of pay is calculated by dividing the employee’s total wages, notincluding overtime premium pay, by the employee’s total hours worked inthe full pay periods of the prior 90 days of employment

– Many policies only pay the base rate

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Examples

• Hourly employee receives a shift premium for working a night shift

• Hourly employee may work at more than one rate

• Exempt employee receives a commission in addition to a base salary

• Exempt employee receives a quarterly incentive based on individualproduction

• Exempt employee receives a quarterly incentive based on group• Exempt employee receives a quarterly incentive based on groupproduction

• Exempt employee receives an annual bonus based on achievement ofindividual goals and company performance

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• Employer Notice, Posting, and Recordkeeping Requirements

1. Employers must display a poster, created by the Labor Commissioner

2. Employers must include an additional clause regarding sick leave entitlementin the Wage Theft Prevention Act notice

3. Wage Statement: Employers must provide each employee with writtennotice at the time of each payment of wages showing “the amount of paidsick leave available, or paid time off leave an employer provides in lieu of sicksick leave available, or paid time off leave an employer provides in lieu of sickleave.” Such “payday” notice may be included in an employee’s wagestatement or in a separate, simultaneous writing

• The wage-statement requirement is significant for many employers

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• Recordkeeping: An employer must keep for at least three years recordsdocumenting the hours worked and paid sick days accrued and used byan employee. Employees may inspect the records in the same manneras other personnel records available to an employee as described inLabor Code section 226.

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Sick Leave Accrual Method Challenges

• Higher accrual rate than many current sick leave policies (1 hour foreach 30 worked)

• 90-day look-back for piece-rate and/or commissioned employeesconflicts with current policies

• Current policies may not satisfy administrative and recordkeepingrequirementsrequirements

• Current policies may only cover leave for employee’s own illness

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Lump Sum Method Challenges

• First-year lump sum grant is ambiguous

• 90-day period for piece-rate and commissioned employees must beimplemented

• Coordination with leave plans may be challenging

• Creates a new benefit for many employers

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No/Unlimited Vacation

• Challenges

– No tracking of accrual or use

– Not generally paid at 90 day average

• Consider adding a three-day sick leave benefit

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Alternatives – PTO Only

• PTO Only

– Advantages

– One plan – administrative simplicity

– Accrual generally sufficient for California sick leave law

– Disadvantages

– Unclear if use may be limited if accrual is capped

– Extends to all employees– Extends to all employees

– 90-day look-back for commissioned/piece-rate employees is difficult

– No forfeiture – pay out on termination

– Must comply with notice/pay statement requirements

– Infects whole bucket with burdensome AB 1522 requirements

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Alternatives – Sick and PTO

• California Sick Leave Lump Sum and PTO/Vacation

– Advantages

– Lump sum can be limited to minimum

– Recordkeeping only required for California sick leave

– Not a significant additional benefit

– Can reduce PTO/vacation to compensate

– Disadvantages– Disadvantages

– Two plans

– Sick leave benefit may be less than currently provided

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Alternatives – CA Sick Leave Lump Sum,Sick, Vacation

• California Sick Leave Lump Sum, Sick, Vacation

– Advantages

– Lump sum can be limited to minimum

– Recordkeeping only required for California sick leave

– Not a significant additional benefit

– Can reduce PTO/vacation to compensate

– Maximum flexibility– Maximum flexibility

– Disadvantages

– Three plans

– Administratively difficult

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Coordinating Paid Leaves of Absence

• FMLA, CFRA, PDA, and ADA Leaves

– Require use of sick leave where possible?

– Employee’s own medical condition (FMLA, CFRA, PDA, ADA)

– Care for ill family member (CFRA, PDA)

– Require use of PTO/vacation if possible?

– FMLA, CFRA, ADA, but not PDA

– Care for new child– Care for new child

– As a prerequisite to PFL

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Is There Hope For A Change In TheseRequirements?

• Assembly Member Gonzalez, the author of the paid sick leave law, hasintroduced “clean up” legislation, AB 304:

• http://www.leginfo.ca.gov/pub/15-16/bill/asm/ab_0301-0350/ab_304_bill_20150326_amended_asm_v98.pdf.– Must work for same employer for 30 days in a year

– Allow an employer to provide for sick leave accrual on a basis other than one hourfor each 30 hours worked, provided that the accrual is on a regular basis andemployee will have 24 hours by the 120th day.

– Clarifies that must provide 3 days/24 hours of paid sick leave at the beginning of– Clarifies that must provide 3 days/24 hours of paid sick leave at the beginning ofeach calendar year, year of employment, or 12-month basis.

– Addresses “unlimited” polices and allows employers with unlimited sick/PTOpolicies to put “unlimited” on the paystub

– Use employees hourly rate in calculating value of sick day. Deletes commissions.– If employees have different rates in pay period, use regular rate for overtime purposes

– Do not have to reinstate sick pay to rehired employee if already paid out.

• Please contact Assemblywoman Lorena Gonzalez!– https://lcmspubcontact.lc.ca.gov/PublicLCMS/ContactPopup.php?district=AD80.

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Other Pending Legislation

• There are a number of important California bills pending that will beheard over the next few weeks:

– Overtime Exemption for Highly-Compensated Employees;

– Cure Period for PAGA;

– Requirement that Food and Retail Establishments Provide Two Weeks’ Noticeof Schedule Changes;

– Double Time on Certain Holidays;– Double Time on Certain Holidays;

– Flexibility on Alternative Workweeks;

– Increase in Minimum Wage.

• Lobby your State Representative on these proposed laws.

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NEW CFRA REGULATIONSNEW CFRA REGULATIONS

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New CFRA RegulationsPurpose

• Amendments to California Family Leave Act Regulations, Cal. CodeRegs., tit. 2, §§ 10087-10097 (effective 7/1/15)

• http://www.dfeh.ca.gov/res/docs/FEHC/Final%20Text%20(1).pdf

• Final Statement of Reasons is 84 pages(!) long:http://www.dfeh.ca.gov/res/docs/FEHC/Final%20Statement%20of%20Reasons%20with%20Addendum.pdfeasons%20with%20Addendum.pdf

• We will highlight some key points only

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New CFRA RegulationsPurpose

• What was the purpose of the amendments?

– Clarify confusing rules, make technical amendments to ease readability, andadopt and modify some of the parallel federal FMLA regulations.

– Goal of creating a more comprehensive set of rules to ensure that employeesand employers better understand their rights and duties, in turn reducinglitigation costs and court overcrowding.

Approved March 4, 2015 and effective July 1, 2015Approved March 4, 2015 and effective July 1, 2015

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Differences Between CFRA and FMLA

• FMLA only (may not run concurrently with CFRA)

– Qualifying exigency related to military service.

– Care of family member with military service–related illness or injury(maximum of 26 weeks in a 12-month period).

– Employee disabled by pregnancy, childbirth, or a related medical condition.

– Covered by FMLA but not CFRA (pregnancy is not a serious health condition underCFRA).CFRA).

– Therefore, California employees may get up to 4 months’ FMLA leave/pregnancydisability leave and an additional 12 weeks’ CFRA baby-bonding leave (or greater ifthe employer has a more generous policy).

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Differences Between CFRA and FMLA

• Registered domestic partners

– Covered by CFRA not FMLA

• Different intermittent leave rights under FMLA and CFRA

– CFRA more generous to employees

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Who Is Eligible?Location

• Like FMLA, CFRA only applies to employees where there are 50employees within 75 miles

• Many employers choose to give FMLA/CFRA rights to all employees

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Who Is Eligible?Home Offices

• What about employees in home offices/with no fixed worksite?

– For employees with no fixed worksite, the worksite is the site to which theyare assigned as their home base, from which their work is assigned, OR towhich they report.

– For example, for the purpose of counting 50 employees, if a salespersonworks from home in California, but reports to and receives assignments fromher corporate headquarters in New York, the New York headquarters, nother corporate headquarters in New York, the New York headquarters, nother home, would constitute the worksite from which there must be 50employees within a 75-mile radius in order for the salesperson to be eligibleunder the CFRA.

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Who Is Eligible?Hours Worked

• Like FMLA, CFRA requires employees to have worked 1,250 hours and12 months to be eligible

– What if employee becomes eligible during a leave of absence?

– If worked 1,250 hours but not 12 months before taking a leave, but hits the 12-month mark during the leave, then eligible for leave

– Watch out for time spent working on the employer’s premises through astaffing or temp agency.staffing or temp agency.

– Time spent working through a staffing or temp agency counts toward the 12-months/1,250-hours requirement

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Who Is Eligible?Hours Worked

– For an employee taking baby bonding leave immediately following apregnancy disability leave, the 1,250 hours/12 months starts before thepregnancy disability leave commences.

– Once the employee meets the two eligibility criteria (1,250 hours/12 months)and takes a leave for a qualifying event, the employee does not have torequalify, in terms of the number of hours worked, in order to take additionalleave for the same qualifying event during the employee’s 12-month leaveperiod.period.

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Who Is Eligible?Number of Employees

• Who counts in deciding whether an employer has 50 employees?

– Employees on paid or unpaid leave, including CFRA leave, leave of absence,disciplinary suspension, or other leave, are counted so long as the employerhas a reasonable expectation that the employees will later return to activeemployment

– Independent contractors don’t count

– Commission-only employees do count– Commission-only employees do count

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Serious Health Condition

• Serious health condition includes treatment for substance abuse

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Break in Service

• If there is a break in service of more than 7 years, the employer may,but does not have to, count the prior period of employment toward the12-month requirement (be consistent).

– Unless it was a break due to military service or there is a written agreement tocount such prior service

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Reinstatement

• The position to which the employee is returned must be “virtuallyidentical.”

– “Employment in a comparable position” means employment in a position thatis virtually identical to the employee's original position in terms of pay,benefits, and working conditions, including privileges, perquisites, and status.

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Fitness for Duty

• An employer may not require an employee to undergo a fitness-for-dutyexamination as a condition of the employee’s return.

• After an employee returns from CFRA leave, any fitness-for-dutyexamination must be job related and consistent with business necessity.

• An employer is not entitled to a release to return to work for eachabsence taken on an intermittent or reduced-leave schedule.absence taken on an intermittent or reduced-leave schedule.

– However, an employer is entitled to a release to return to work for suchabsences up to once every 30 days if reasonable safety concerns existregarding the employee's ability to perform his or her duties

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Certification

• What can an employer require in a certification?

– Not the symptoms, diagnosis or other confidential medical informationregarding the employee’s serious health condition

• New provision: The employer may not contact a healthcare provider forany reason other than to authenticate a medical certification

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Certification

• Revised Sample Certification of Health Care Provider form to include safeharbor language of the California Genetic Information NondiscriminationAct of 2011 (CalGINA).

• Requirement that employees be notified of the consequences if they failto provide medical certifications.

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Joint Employer

• When is there joint employer liability for compliance with CFRA?

• A joint employer relationship may exist if:

– Two or more employers agree to share an employee’s services or tointerchange employees;

– One employer acts directly or indirectly in the interest of the other employer inrelation to the employee; or

– The employers are not completely disassociated with respect to the– The employers are not completely disassociated with respect to theemployee’s employment and may have mutual control of the employee’s workwith the other employer.

• Does not completely mirror FMLA

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Key Employee

• The employee is salaried.

• The employee is among the highest paid 10% of all employees within 75miles of his or her worksite.

– Determined by comparing the year-to-date wages of the employer’semployees within 75 miles of the worksite where the requesting employee isemployed at the time of the leave request, divided by the number of weeksworked (including weeks in which paid leave was taken).worked (including weeks in which paid leave was taken).

• Reinstating the employee would cause substantial and grievouseconomic injury to the employer's operations.

• The employer notifies the employee upon realizing that it will not rehirethe employee.

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Steps to take by July 1

• Update FMLA/CFRA policies.

• Replace workplace posters. (Permits electronic posting of CFRA noticesand requires employers to translate the CFRA notice into every languagespoken by at least 10% of its workforce.)

• Provide training.

• Engage in interactive process.• Engage in interactive process.

• Revise medical certification. Have a clear policy on medical certificationdeadline requirements and include all requirements in Notice toEmployees and Designation Notice.

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Questions?

Barbara J. MillerPartnerOrange [email protected]

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Melinda S. RiechertPartnerSilicon [email protected]

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This material is provided as a general informational service to clients and friends of Morgan, Lewis & Bockius LLP. It does not constitute, and should not beconstrued as, legal advice on any specific matter, nor does it create an attorney-client relationship. You should not act or refrain from acting on the basis of thisinformation. This material may be considered Attorney Advertising in some states. Any prior results discussed in the material do not guarantee similar outcomes.Links provided from outside sources are subject to expiration or change.

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Documents

CALIFORNIA PAID SICK LEAVE AND CFRA REGULATIONS: ARE …