Earlier this month, the Chicago Department of Business Affairs and Consumer Protection published the final rules supporting Chicago’s new Paid Leave and Paid Sick and Safe Leave Ordinance. Both the ordinance and the rules go into effect on July 1, 2024, and will require employers to annually provide up to 40 hours of Paid Leave and up to 40 hours of Paid Sick Leave to covered Chicago employees. Below, we highlight key provisions in the final rules that employers should keep in mind while updating their paid leave policies in anticipation of the July 1 compliance date.
Definition of a benefit year
The final rules define “benefit year” as the 12 consecutive-month period that an employer sets for an employee to receive Paid Leave and Paid Sick Leave benefits. Employers are permitted to set different dates for each employee (e.g., based on the anniversary date of employment) or synchronize all covered employees to have benefits granted at the same time (e.g., based on a calendar year or fiscal year). Employers who elect to synchronize the benefit year for all employees must ensure that each employee is granted the Paid Leave/Paid Sick Leave days that they are entitled to, regardless of when their employment began.
Definition of a covered employee
The ordinance defines “Covered Employee” as “an Employee who, in any particular two-week period, performs at least two hours of work for an Employer while physically present within the geographic boundaries of the City.” However, in a provision on day laborers, the final rules describe a “covered employee” as someone who works “at least eighty hours within any 120-day period for an Employer while physically present within the geographic boundaries of the City” (the requirement in Chicago’s current paid sick leave law).
Regardless of whether the Department clarifies this apparent discrepancy, we advise that employers take a more inclusive approach when considering which of their employees are covered under the ordinance.
Remote and hybrid workers
The final rules confirm that only hours worked within the City of Chicago count towards the accrual of Paid Leave and Paid Sick Leave. The rules clarify that remote workers who meet the definition of a covered employee are covered even if the employer is physically located outside of Chicago. Conversely, covered employees do not accrue Paid Leave or Paid Sick Leave for the hours they are not working within the physical boundaries of Chicago, even if the employer is located in Chicago. Chicago-based employers may, of course, have a more generous policy that allows accrual for hours worked outside of Chicago, such as for employees who are working on a hybrid basis.
Frontloading and carryover
Under the ordinance, if an employer chooses to frontload Paid Leave or Paid Sick Leave, the employer is not required to provide additional paid time off of the type of paid time off that is frontloaded. The final rules clarify the frontloading timeline—if an employer grants 40 hours of Paid Leave no later than 90 days after an employee started working, then the employer is not required to provide additional Paid Leave. If an employer grants 40 hours of Paid Sick Leave no later than 30 days after an employee started working, then the employer is not required to provide additional Paid Sick Leave.
Regarding carryover, the ordinance provides that if an employer frontloads 40 hours of Paid Leave, then the employer is not required to carryover unused Paid Leave hours to the subsequent 12-month period. If Paid Leave is not frontloaded, then employers must carryover up to 16 hours of accrued, unused Paid Leave. While the ordinance was silent on carryover of frontloaded Paid Sick Leave, employers should note that the final rules now require carryover of up to 80 hours of accrued, unused Paid Sick Leave, regardless of whether Paid Sick Leave is frontloaded.
Finally, the rules provide that the accrual of Paid Leave and Paid Sick Leave in a subsequent benefit year must be in addition to any accrued, unused Paid Leave and Paid Sick Leave hours carried over from the previous benefit year.
Use of paid leave
The ordinance provides that employers must allow employees to use accrued Paid Leave no later than the 90th calendar day after the employee begins employment, and accrued Paid Sick Leave no later than the 30th calendar day. The final rules add that employers who elect to offer 80 hours of Paid Leave for any reason (instead of 40 hours of Paid Leave and 40 hours of Paid Sick Leave) must allow employees to use accrued Paid Leave no later than the 30th calendar day after the start of employment.
The final rules also prohibit employers from forcing an employee to be paid for Paid Leave or Paid Sick Leave in lieu of use.
Denial of paid leave
Under the final rules, an employer who denies a Paid Leave request must do so in writing, stating a “pre-established policy rationale” and issuing the written denial immediately upon denying the request. A denial of Paid Leave should be based on a consideration of relevant factors such as:
- Whether granting Paid Leave during a particular time period would “significantly impact” business operations;
- Whether the employer provides a need or service critical to the health, safety, and welfare of Chicago;
- Whether similarly situated employees are treated the same for the purposes of reviewing, approving, and denying Paid Leave; and
- Whether the employee has “meaningful access” to use all Paid Leave time that they are entitled to.
Notice and posting; employee records; employee complaints
The final rules provide detailed information on employer obligations for notification and record retention, as well as the complaint process for alleged employer violations.
The rules further expound on the ordinance’s comprehensive notice and posting requirements, adding that acceptable methods of notice to employees who are enrolled in direct deposit may include email, internal communication channels, and publication in an employee handbook or a paid leave policy. The rules also provide a list of information that must be kept for each covered employee for compliance purposes, which must be retained for at least 5 years, or for the duration of any claim, civil action, or investigation, whichever is longer.
According to the final rules, if a complaint is made to the Department regarding an alleged violation of the ordinance by an employer, the Department will consider multiple factors in deciding whether to assess monetary fines, including, but not limited to, whether the employer made good faith efforts to cure, correct, or mitigate violations after receiving notice, or whether the violations were of a technical nature and did not cause material harm. Note that the ordinance also permits complainants to seek redress in civil court for alleged violations.
