Chicago has enacted an ordinance that will require employers to provide both paid sick leave and paid leave that employees working in Chicago can use for any reason. The ordinance takes effect December 31, 2023 and replaces an existing paid sick leave requirement in the city.
The Details
Covered Employers and Employees
The ordinance applies to all employers with at least one “covered employee” working in Chicago. A covered employee is broadly defined as an employee who, in any two-week period, performs at least two hours of work for an employer while physically present within the geographic boundaries of Chicago, regardless of where the employer is located. Any compensable time an employee spends within Chicago counts towards the hours worked.
The ordinance applies to most individuals working in Chicago (including domestic workers), with some narrow exceptions that include:
· Independent contractors (unless the independent contractor is a domestic worker);
· Employees who work for governmental agencies other than the City and its “Sister Agencies” (the ordinance applies to City employees);
· Employees working in the construction industry who are covered by a bona fide CBA; and
· Other employees who are a party to a valid collective bargaining agreement (CBA) in effect on January 1, 2024. After January 1, 2024, the requirements of the ordinance may only be waived in a bona fide CBA if the waiver is set forth explicitly in the agreement in clear and unambiguous terms.
Accrual
For every 35 hours worked, employees are entitled to accrue at least one hour of paid leave they can use for any reason and one hour of paid sick leave. The time must accrue in hourly increments and not fractional accruals. There is an exception that allows for monthly accrual if an employer provides employees more hours of leave than what is required under the ordinance.
Accrual begins January 1, 2024 or the employee’s first day of work, whichever is later. Employees who are classified as exempt from overtime will be presumed to work 40 hours per week, unless the employee’s normal workweek is less than 40 hours.
Accrual Caps
There is a cap on accrual of 40 hours per 12-month period for each type of paid leave. The year or “12-month period” for a covered employee must be calculated from the date the employee begins to accrue paid time off under the ordinance.
Front-loading
Instead of providing the leave via the accrual method, employers can choose to frontload all 40 hours of paid leave for any reason and 40 hours of paid sick leave on the first day of employment or the first day of the 12-month period. (e.g., on January 1, 2024, for employees working in Chicago at that time).
Carryover
When an employer provides the paid leave via the accrual method, employees are entitled to carryover up to 16 hours of unused paid leave for any reason and 80 hours of paid sick leave from one year to the next.
When employers frontload the paid leave for any reason, no carryover is required. However, the ordinance is silent as to whether frontloading precludes the year-end carryover for paid sick leave. The safest course of action is to assume that even if an employer frontloads 40 hours of paid sick leave to employees at the beginning of a 12-month period, the employer still must permit employees to carry over up to 80 hours of paid sick leave to the next benefit year.
Rate of Pay
Employees must receive their regular rate of pay when using paid sick leave and paid leave for any reason which includes continuing health care benefits if the employee receives health care benefits from their employer. For nonexempt employees, the regular rate of pay to be used for all leave is calculated by dividing the employee’s total wages by the total hours worked in full pay periods in the prior 90 days of employment. These wages do not include overtime pay, premium pay, tips or gratuities, or commissions, but an employee’s hourly rate of pay for leave cannot be less than the employee’s base hourly wage or the applicable minimum wage.
Impact on Existing Policies
If a covered employee accrued paid sick leave prior to January 1, 2024, and the employer’s existing paid time off policy does not comply with the ordinance, any unused paid sick leave the employee is entitled to carryover must be transferred to the new paid sick leave bank.
If an employer already has a paid time off policy that meets or exceeds the minimum requirements of the ordinance, the employer is not required to provide additional paid leave for any reason or paid sick leave. Note however that if an employer chooses to charge time required under the ordinance against its paid time off policy, the employer must clearly state in its policy that it is doing so.
Unlimited Paid Time Off Policies
In lieu of the accrual method or frontloading, employers may grant employees “unlimited paid time off” on the first day of their employment or on the first day of a 12-month period, so long as such unlimited hours of paid time may be used for any reason. Employers who use this method are not required to carry over an employee’s unused paid time off to the next benefit year, regardless of whether the paid time off is considered paid leave for any reason or paid sick leave. Employers considering this approach should discuss the pros and cons with counsel prior to implementing such a policy.
Use
The ordinance does not include any maximum caps on how many hours of paid leave for any reason or paid sick leave an employee may use during a 12-month period.
Employees may begin to use accrued paid leave for any reason 90 days after the start of employment and employers may require paid leave for any reason to be taken in 4-hour increments.
Employers are prohibited from asking employees for the reason for the need for such leave and are prohibited from asking for documentation. However, an employer may establish reasonable policies for the use of paid leave for any reason to:
· Require an employee to give reasonable notice, as long as it does not exceed seven days before using such paid leave; and
· Maintain continuity of employer operations by requiring an employee to obtain reasonable preapproval from the employer before using paid leave, subject to rules that will be published by the city’s Office of Labor Standards.
Employees are entitled to use paid sick leave 30 days after the start of employment and employers may require paid sick leave to be taken in 2-hour increments.
If an employee’s need for paid sick leave is reasonably foreseeable, an employer may require up to seven days’ notice before the leave is taken. Where an employee is absent for more than three consecutive workdays, the employer may require certification that the use of paid sick leave was covered by the ordinance. See the text of the ordinance for details on the type of documentation that may be required for paid sick leave.
Employees may use paid sick leave for the following reasons:
- The employee or their family member is ill or injured, or for the purpose of receiving professional care, including preventative care, diagnosis, or treatment, for medical, mental, or behavioral issues, including substance use disorders;
- The employee or their family member is the victim of domestic violence, a sex offense, or trafficking;
- The employee’s place of business is closed by order of a public official due to a public health emergency, or the employee needs to care for a family member whose school, class, or place of care has been closed; or
- The employee obeys an order issued by the mayor, the governor of Illinois, the Chicago Department of Public Health, or a treating health care provider, requiring the employee to:
Unless obligated by a city, state, or federal law, an employee may choose whether to use paid sick leave or paid leave for any reason prior to using any other leave provided by the employer or by city, state, or federal law. In other words, employers cannot force concurrent use of leaves provided by law or employer policy unless concurrent use is required by city, state or federal law.
Payout
Certain employers are required to pay out unused paid leave that can be used for any reason upon separation from employment or transfer outside of the geographic limits of the city.
· Employers with 1-50 covered employees are not required to pay out unused paid leave upon separation or transfer.
· Employers with 51-100 covered employees must pay out up to 16 hours of paid leave upon separation or transfer through December 31, 2024. On or after January 1, 2025, these employers must pay out all of the unused paid leave upon separation or transfer.
· Employers with more than 100 covered employees must pay out all unused paid leave for any reason upon separation or transfer, effective January 1, 2024.
- As indicated above, employers can satisfy the ordinance requirements through the use of an unlimited paid time off policy. If so, employers must pay employees who are separating employment or transferring to a location outside of Chicago 40 hours of paid time off for any reason minus the hours of paid time off the employee used during the 12-month period before the date of separation.
No employers are required to pay out unused paid sick leave upon separation or transfer, unless they have promised otherwise.
An employee may request payout of their unused paid leave for any reason if they have not received a work assignment for 60 days. If an employer has not offered an employee a work assignment for 60 days, the employer must proactively notify the employee in writing that the employee may request payout of their accrued, unused paid leave for any reason.
If an employee is transferred to a separate division, entity, or location, but still remains employed by the same employer, the employee may continue to use all accrued, unused paid leave for any reason and paid sick leave accrued.
Employer Notice Requirements – Impact to Wage Statements
Each time wages are paid, employers must provide employees with a written notice that includes:
· The amount of paid leave for any reason available for use
· Accrual rate for paid leave for any reason
· The amount of paid leave for any reason accrued since the last notice
· The amount of paid leave for any reason used since the last notice
· The amount of paid sick leave available for use
· Accrual rate for paid sick leave
· The amount of paid sick leave accrued since the last notice
· The amount of paid sick leave used since the last notice
Employers that credit paid sick leave and paid leave for any reason on a monthly basis may update the notification monthly. Employers may choose a reasonable system for providing this notice, such as listing the information on each wage statement or an online system employees can use to access the information.
Other Employer Notice Requirements
Employers must post a notice about the ordinance in a conspicuous place at each facility with a covered employee within the geographic boundaries of the city. If the employer’s workforce includes a significant portion of non-English speakers, the employer must notify the city’s Office of Labor Standards, which will create a notice in other languages. Covered employees may also ask the city for the notice in other languages, which employers must also display in accordance with the ordinance.
Employers must provide a notice of the employee’s rights under the ordinance with the employee’s first paycheck and annually thereafter with a paycheck issued within 30 days of July 1. The city’s Office of Labor Standards will create a model notice.
At the start of employment, employers must also provide written notice of their paid time off policy, including accrual rates and any employee paid time off notification requirements. Notice of any change to the employer’s paid time off policy requirements must be provided to employees at least five days before the change takes effect. If the change will affect the employee’s final compensation, the notice must be provided at least 14 days before.
Recordkeeping
Employers must retain the following records for five years or the duration of a claim, civil action, or investigation, whichever is longer:
· Employee names, addresses, hours worked, pay rates, and wage agreements;
· Number of paid leave hours earned each year, dates on which the leave was used and paid; and
· Any other records necessary to demonstrate compliance with the ordinance.
Employers must provide a copy of the records to covered employees upon request.
Interaction with the Illinois Paid Leave for All Workers Act
Effective January 1, 2024, Illinois has its own law requiring paid leave that employees can use for any reason. However, the state law does not apply to any employer that is covered by a municipal or county ordinance that is in effect on January 1, 2024 that requires employers to give any form of paid leave to their employees.
Since the city’s ordinance takes effect December 31, 2023, employers located within Chicago will be subject only to the requirements of the Ordinance. However, an Illinois employer located outside of Chicago that has employees who work in Chicago for at least two hours over any two-week period will have to comply with the Paid Leave for All Workers Act for its employees who do not work in Chicago and comply with the ordinance for its employees who work in Chicago.
Next Steps
· Review, policies, forms, and practices to ensure compliance with the Chicago ordinance by December 31, 2023.
· Update to your time-off settings in your payroll system by submitting a request to your ADP TotalSource® service contact. Your ADP TotalSource® service contact will submit your request to our Paid Time Off (PTO) team for review.
· Train supervisors on the new law and how to handle leave requests.
· To update your employee handbook, use the Handbook Builder functionality in your payroll system.
· If you choose to satisfy the employee notice pay statement requirement using the employee pay statement option, contact your ADP TotalSource® payroll contact for support. The accrual rate and amount accrued since last notice may require additional inputs during the payroll process.