The City of Chicago’s (the “City’s”) and Cook County’s (the “County’s”) paid sick leave (“PSL”) Ordinances took effect on July 1, 2017, generally requiring employers to provide employees in Chicago and non-opt out locations in Cook County with 40 hours of PSL per year, plus additional PSL for employers/employees covered by the U.S. Family and Medical Leave Act (“FMLA”). Based on “safe harbor” provisions in both Ordinances, many employers are assuming that their Paid Time Off (“PTO”) policies are sufficient – as written – to comply with these new PSL obligations. However, a careful reading of the Ordinances and their respective rules (“Rules”) leads to the inescapable conclusion that almost no traditional PTO policy satisfies the Ordinances’ burdensome and somewhat complex requirements.
Safe Harbor Provisions
Both Ordinances contain a “safe harbor” provision that essentially says that if the employer grants paid time off to employees in an amount and manner that meets the requirements for PSL under the Ordinance, the employer is not required to provide additional paid leave. The final Rules adopted by the City and the County include additional guidance with respect to this issue:
Chicago Safe Harbor Rule, MW 3.01
The Paid Sick Leave portion of the Ordinance has three main categories which must be complied with: (1) accrual / grant of hours of Paid Sick Leave; (2) carryover of Paid Sick Leave from one year to the next; and (3) usage of Paid Sick Leave. Grant of sufficient hours may exempt an Employer from carryover as explained below. The Ordinance establishes minimum standards. Employers are at liberty to go above the standards set forth in the Ordinance. Those Employers whose Paid Time Off policies meet or exceed the requirements of the Ordinance in all three categories are not required to provide additional leave or [comply with] the record requirements. However, other requirements of the Ordinance, such as when a Covered Employee must be allowed to begin using Paid Sick Leave, must still be followed.
County Safe Harbor Rule, §600.300
. . . The Commission believes that the Ordinance provides Covered Employers with this flexibility [to rely on an existing PTO policy] so long as, in practical effect, Covered Employees (1) are awarded leave that, if it were converted into an hourly rate, accrues at a rate that is equivalent to or faster than that required by §400.200; (2) can carry over unused leave in an amount equivalent to or greater than that required by §400.600 from one Accrual Period to the next; (3) can use an amount of leave in each Accrual Period that is equivalent to or greater than that required by §500.300; (4) can use such leave for purposes that include at least those grounds set out in §500.500; and (5) can do so without providing notice or documentation that is more burdensome than that described in §§500.600 and 500.700.
These safe harbor provisions were no doubt included in an effort to convince employers (who may have otherwise opposed the passage of the Ordinances) that the Ordinances would not impose additional obligations on them if they already maintained PTO policies that were more generous than the Ordinances’ PSL requirements. After all, virtually all PTO policies permit employees to take at least 60 hours (7.5 days) off with pay per year for any reason, including personal illnesses, family member illnesses, and other personal reasons protected by the Ordinances. Since 60 hours is the maximum number of PSL hours that a FMLA-covered employer must allow an employee to use per year under the Ordinances (with non-FMLA-covered employers only being required to provide 40 PSL hours), many employers have assumed that their existing PTO policies comply with the Ordinances.
However, the Ordinances contain several additional requirements beyond specifying the minimum amount of paid leave. Indeed, the Ordinances are essentially “mini” FMLA laws that grant all employees – even part-time, temporary and seasonal employees – an absolute right to take paid leave for certain purposes protected by the Ordinances (a “Protected Purpose”), so long as the employee satisfies all eligibility criteria and complies with the notice, certification, and other requirements of the Ordinances. By contrast, employers almost always reserve the discretion to grant or deny PTO under a traditional PTO policy, impose advance notice requirements on employees, and restrict PTO to only certain categories of employees. The following is a non-exhaustive list of the potential landmines associated with relying on a traditional PTO policy (without modification) to comply with the Ordinances.
Discretion to Deny PTO, Notice, and Documentation Requirements
The most fundamental problem with relying on traditional PTO policies to comply with the Ordinances is that such policies almost always reserve the employer’s right to deny PTO requests for any reason, including the employer’s operational needs and other employees’ time off (e.g., vacation) requests. But employers may not deny PSL requests made in compliance with the Ordinances, and may not count PSL-qualifying absences against the employee for attendance or other disciplinary purposes.
Employers also may not require advance notice for use of PSL for an unforeseeable Protected Purpose, and may only require advance notice (up to seven days) for reasonably foreseeable PSL if they have a written policy apprising employees of this requirement. See, e.g., County Rules, §500.600(B). And while the Ordinances do not mandate that an employer include in its policy the circumstances in which the employer may require documentary proof that certain PSL was taken for a Protected Purpose, it would be virtually impossible for the employer to exercise its right to obtain such documentation without a written policy (and, ideally, a well-written PSL request form) explaining the process for apprising the employer of the Protected Purpose for which PSL is sought and the anticipated length of the PSL. Without this information, the employer would not know whether it has a right to documentation establishing that the PTO/PSL was taken for a Protected Purpose.
Of course, for ease of administration, an employer could choose to grant all PTO requests irrespective of the purpose for which PTO is sought and without requiring advance notice or requesting documentary proof of the reason for the request (in circumstances in which such proof is permitted by the Ordinances). But that would mean that a poor-performing employee with attendance problems could call and request PTO any time he/she liked with no advance notice or documentation of the need for the PTO, and the employer would have no recourse but to permit the employee to take those days off without counting the absences against his/her attendance. This type of no-advance notice, guaranteed PTO would make it very difficult for employers to ensure that the Company’s operational needs are met, particularly for smaller employers and when multiple employees in the same job function or department take PTO at the same time without advance notice for multiple consecutive workdays.
For these reasons, it is advisable that employers revise their PTO policies to indicate that, while PTO taken for a Protected Purpose is subject to different notice and documentary requirements (which requirements should be set out in the policy), employers retain the discretion to deny PTO requests when they are made for reasons other than a Protected Purpose. Employers also should revise their PTO request procedures to include submission of a written request identifying the nature of the PTO as PSL when applicable.
Carryover
The Ordinances also impose certain obligations on employers to permit carryover of PSL from one year to the next. However, depending on the structure of the PTO/PSL policy and the Ordinance at issue, the employer may be required to treat PSL carryover rights differently when PSL is carried over to the following benefit year for a FMLA-qualifying reason – i.e., to be used concurrently with (otherwise) unpaid FMLA leave. The following example, included among the County’s 46 pages of Rules interpreting the Ordinance, illustrates the complexity of a FMLA-covered employer’s potential carryover obligations which (again) are dependent on the structure of the PTO/PSL policy:
. . . . For example, if a Covered Employee of an FMLA-Eligible Covered Employer has 30 hours of unused accrued Earned Sick Leave at the end of her first Accrual Period, she can carry over 15 of those hours into the second Accrual Period as Ordinance-Restricted Earned Sick Leave. However, rather than losing the remaining 15 hours of unused accrued Earned Sick Leave, she could carry over an additional 15 hours of Earned Sick Leave into the next Accrual Period as FMLA-Restricted Earned Sick Leave. If that Covered Employee has 70 hours of unused accrued Earned Sick Leave at the end of her second Accrual Period, she can carry over 20 as Ordinance-Restricted Earned Sick Leave into the third Accrual Period (half of 70 is 35, but a Covered Employer is not required to allow a Covered Employee to carry over more than 20 hours of Ordinance-Restricted Earned Sick Leave from one Accrual Period to the next). The Covered Employee could also carry over 40 hours of unused Earned Sick Leave that was not carried over as Ordinance-Restricted Earned Sick Leave as FMLA-Restricted Earned Sick Leave (50 hours of unused Earned Sick Leave was not carried over as Ordinance-Restricted, but a Covered Employer is not required to allow a Covered Employee to carry over more than 40 hours as FMLA-Restricted Earned Sick Leave into the next Accrual Period).
. . . .
County, §400.600(B).
No traditional PTO policy addresses carryover of PTO from one year to the next in this fashion. While the Ordinances’ carryover requirements can be avoided with certain “extra” PTO front-loading models, the policy must be carefully drafted to comply with the Ordinances. And this assumes that the employer is willing to front-load “extra” PTO to its employees. Many employers prefer that employees accrue PTO on a prorated basis over the course of the year rather than front-loading PTO, especially in Illinois where employers are required to pay out all accrued but unused PTO upon separation from employment for any reason under the Illinois Wage Payment & Collection Act (the “IWPCA”).
For instance, an excess front-loading model that treats all PTO the same (rather than affording special treatment to PTO taken for a Protected Purpose) would permit an employee to resign on the date he or she receives a front-loaded, annual PTO allotment and receive full pay for such allotment in his or her final paycheck. See 56 Ill. Admin. Code, §300.520(f)(3). By contrast, neither the Ordinances nor the IWPCA requires an Illinois employer to pay out accrued but unused PSL upon separation from employment. See Chicago Ordinance, §1-24-045(a)(3); County Ordinance, §42-3(a)(3); 56 Ill. Admin. Code, §300.520(f)(3). Notably, it is possible to limit the amount of accrued but unused PTO that must be paid out upon separation from employment by modifying a PTO policy to afford special treatment to PTO taken for a Protected Purpose, but this requires careful drafting to ensure compliance with both the Ordinances and the IWPCA.
Conversion to a Benefit Year
If the Ordinances are not burdensome enough, both Ordinances define the benefit year (a/k/a “Accrual Period”) as July 1-June 30 for employees employed as of July 1, 2017. For employees hired after July 1, 2017, the default benefit year is the 12-month period following an employee’s date of hire. While both Ordinances permit employers to convert employees to a different benefit year (e.g., to a calendar year or the employer’s fiscal year), employers may do so only if all employees in all circumstances are no worse off than they would have been had the Ordinances’ default benefit year not been changed. As the County Rules explain, the methodologies for converting employees to a different benefit year are highly fact-specific and generally require employers to permit “extra” front-loading and/or carryover to ensure that employees are no worse off: “The exact methodology — whether extra front-loading or extra carryover — is highly fact-specific and depends on, among other things, the dates that the Covered Employer is seeking to use for the Covered Employee’s Accrual Period, the Covered Employee’s Start of Employment, the Covered Employee’s Date of Initial Accrual, and the number of hours that the Covered Employee will work in Cook County.” County Rules, §600.300(E). A traditional PTO policy typically will not permit an employer to convert employees to a calendar or fiscal benefit year for purposes of PTO accrual/award, carryover, and/or use and, therefore, will not be compliant without modification.
Categories of Employees Eligible for PTO
The Ordinances also have broader coverage than most traditional PTO policies. For example, PTO policies rarely cover temporary employees, seasonal employees, or employees who are regularly scheduled to work fewer than 20 hours per week. However, the Ordinances apply to all employees (subject to certain eligibility and use requirements), including temporary and seasonal employees. Thus, employers seeking to avail themselves of the Ordinances’ PTO safe harbor provisions must either revise their PTO policies to cover all employees (at least for the purposes protected by the Ordinances) or adopt a separate Paid Sick Leave policy for employees not eligible for PTO.
Conclusion
Many employers have been lulled into a false sense of security by the Ordinances’ purported safe harbor provisions. Despite these provisions, the Ordinances and accompanying Rules are complex and burdensome, and include many requirements not found in most PTO policies. Accordingly, employers who rely on their existing PTO policies without modification do so at their own peril.
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