California’s Healthy Workplaces, Healthy Families Act of 2014 (AB 1522) is one of the more comprehensive paid sick leave laws in the US. It mandates that three days of sick leave are available to full-time employees. And some California cities, such as San Francisco and Los Angeles, add even more. As of January 31, 2018, AB 1522 has been expanded to impact nearly all California employers.
Outsourcing payroll and benefits to a third-party HR solution like Zenefits is a great way to ensure compliance with California’s state and local labor laws. This easy-to-use software offers a 14-day free demo and also lets your employees manage pay stubs and time off and on their own, saving you from answering routine HR questions.
How California Paid Sick Leave Works
Paid sick leave is time that employees can take away from their job to attend to their own or their family’s medical needs, paid at their regular pay rate. This can include illnesses, doctors appointments or, in California, time away due to domestic violence issues. While not required by federal law, three days of paid sick leave is required in California. In addition, many cities in California have stricter requirements, such as San Francisco, that requires 72 hours of paid sick leave be provided to full-time employees.
In California, there are two statutes that address paid sick leave:
These California laws explicitly mandate that:
- Employers provide 24 hours of paid sick leave to full-time employees each year
- Part-time employees accrue sick leave at the rate of one hour paid sick leave for every 30 hours worked
- Any employee who works more than 30 days in California can start to accrue sick time off
- California employees can use their accrued paid sick leave after 90 days of employment
- Employees should be paid for sick leave at their regular rate of pay
- If employees are paid by commission or by piecework (for example, an assembly line worker who is paid per unit assembled) the rate of sick leave pay is to be averaged based on the employee earnings over the previous 90 days
- There are several ways to calculate sick leave accruals, with examples provided below
- Employers may not require employees to take sick leave in less than two-hour increments — for example, two hours or less could be considered an unpaid break or lunch
- Employers must let employees carry over up to 48 hours of unused sick leave annually
- Sick leave policy must be provided upon hire and posted at the job location
- Rehired employees have a right to reinstate their prior sick leave balances
- Sick leave documentation (like sick leave accruals and payments) must be retained for three years
How California Sick Leave Laws Differ From the Feds
Federal law doesn’t require sick leave to be paid, but there are laws like the Fair Labor Standards Act (FLSA) that affect how leave should be calculated if it is paid. Human resources best practices indicate that exempt employees shouldn’t be required to take sick time in less than full-day increments (to avoid undermining their “exempt” status).
The table below summarizes how different California’s sick leave rules are from the federal government. Further below we provide another table showing examples of California cities that take these requirements even further.
California vs. Federal Sick Leave Rules
|Paid Leave||None required||24 hours (three days) paid sick leave per year for full-time employees|
|Eligibility||None specified||Full-time and part-time employees who work more than 30 days in the state are eligible to use their accrued sick leave after 90 days|
|Pay Rate||No requirements||Regular rate of pay for prior pay period or can average pay rate more than 90 days if pay rate varies, paid by commission, or piece|
|Accrual Calculation||No requirements||One hour of paid sick time for every 30 hours worked or 24 hours per year for full-time employees|
|Usage||Recommends that sick leave not be required to be taken in less than half-day increments by exempt staff||Employer can require employees to use sick leave in no less than two-hour increments|
|Carryover Rules||None required||Up to 48 hours allowed for carry over to the following year (24 hours per year for two years)|
|Posting||FMLA requires employers of 50 or more to post leave policy (that may include sick leave)||All employers must post their paid sick leave policy|
|Notice||Policy can be provided in employee handbook||Policy must be provided upon hire|
|Waiting Period||None required||30-day waiting period before accruals begin and 90-day waiting period before usage|
|Rehires||No requirement for sick leave balances to be reinstated upon rehire||Rehires within one calendar year are to be reinstated with prior sick leave accruals intact|
|Record Retention Rules||If provided, must retain sick leave payment records for three years||Same|
|Exclusions||None specified||Collective bargaining agreements excluded|
|Terminations||No, unless employer offers to pay out unused sick leave balance upon termination||Unused sick leave does not need to be paid out upon termination (unlike accrued PTO)|
While the federal government doesn’t require paid sick leave and, therefore, provides few details on how to set up a sick leave policy, the California Labor Commissioner’s Office provides a free 45-minute webinar to explain the sick time laws in California. They also provide free workplace posters in English and Spanish to explain the policy to your employees and answer frequently asked questions.
Federal & State Laws That Affect Paid Sick Leave in California
California Assembly Bill 304 increases sick leave requirements over and above what’s required by FMLA. In addition, there are local ordinances in major urban areas, such as San Francisco, Los Angeles, San Diego, and the surrounding communities. Depending on where your business is located, you’ll need to abide by the stricter of these regulations in order to remain compliant when offering leave, including sick leave.
The Family Medical Leave Act (FMLA) is a federal law that provides unpaid leave to employees who work in companies that employ more than 50 people in one location. This typically allows employees who have worked at least 1,250 hours per year to take time off for their own or for a family member’s medical needs. California laws providing for paid sick leave can help offset an employee’s lost wages when using FMLA.
The California Family Rights Act (CFRA) adds to the FMLA guideline and even provides a tool to help you calculate how much leave an employee may be eligible for.
Other federal labor laws, such as anti-discrimination laws like the Americans with Disability Act and the Pregnancy Discrimination Act, may also impact how you assess or grant sick leave in California.
How to Calculate Sick Leave in California
Sick leave is calculated differently for part-time hourly vs. salaried employees as well as for employees paid based on commission or piece work. Regardless, accruals need to start on the employee’s 30th day of employment. Alternatively, employers can provide a lump sum of three days per year for full-time staff as long as it’s granted to new hires before their 120th day of employment.
Hourly Sick Leave Accrual
The easiest way to calculate accruals for hourly staff is to provide one hour of sick leave for every 30 hours that the employee has worked. That includes both regular and overtime hours. It also makes it fair for part-time staff who may work fewer hours but will still accrue sick leave at the same 1:30 ratio.
Pat (part-time employee) worked 45 hours in the bimonthly pay period. She accrued 1.5 hours of sick leave.
45 hours / 30 = 1.5 hours leave per pay period
Salaried Sick Leave Accrual
For employees who are salaried, you can estimate accruals based on a 40-hour work week by giving each salaried employee 1.33 hours of accrued sick time for every week worked. That ensures that, during the course of the year, they’ll reach the 24 hours per year of paid sick leave (three days per year) as required in California.
Kerry (salaried employee) is paid every other week. He earns 2.66 hours of sick leave each pay period.
1.33 hours per week x 2 weeks = 2.66 hours leave per pay period
Piecework Sick Leave Accrual Rate
For workers paid by piece or commission, it’s best to pay out three days per year. To determine the pay rate for sick leave when a California worker is paid by the piece, you’ll need to determine how many pieces the employee was paid for (and at what rate) during the prior 90 days, and then use the average daily rate to pay sick leave.
Cory assembled 450 units during the past 90 days, earning $25 per unit and averaging 7.5 units per day. His three days of sick leave should be paid at $187.50 per day.
7.5 units average per day x $25 per unit = $187.50 a day
Commission Sick Leave Accrual Rate
Calculating sick time rates for commission-based employees is very similar to calculating piece work. Again, it’s best to provide commission-based employees with three days or 24 hours per year as a flat rate to keep the math simple. To get an hourly rate to pay for sick leave, divide the total commissions received for 90 days by the number of work hours in that same time frame.
Alex earned $12,000 in commissions during the past 90 days while salaried employees worked 520 work hours. Therefore, Alex’s sick leave should be paid at $23 per hour.
$12,000 in commissions paid / 520 hours = $23 an hour
How to Comply With California Sick Leave Laws
The best way to comply with California sick leave laws is to follow the State of California guidelines. You can then use HR and scheduling software like Zenefits to set and keep track of your PTO policies and manage all your time off requests, both paid and unpaid, all in one place.
California Sick Leave Policy Considerations
As an employer in California, you’ll have some options such as whether to provide sick leave as a lump sum, what time limits to place on your sick leave requests and whether to keep your sick leave policy separate from PTO.
Year-end Lump Sum vs. Rollover of Sick Leave Hours Accrued
California provides two options for employers to process sick leave — a year-end lump sum payment or a rollover of up to three days (one year’s unused sick leave). However, as a business, it’s your choice. You can pay out any unused sick leave balance at the end of each year in lieu of rolling it over if you provide a lump sum amount of 24 hours (three days) at the start of the next year.
Here are the differences between the two options.
|How Much Sick Leave?||Pay out up to 24 hours of unused sick leave at year-end||Rollover up to 24 hours of unused sick leave to the next calendar year|
|Is a Lump Sum of Sick Leave Required at the Start of the Year?||Yes, employer is required to give sick leave balance at the start of year|
New hires must be given sick leave balance within 120 days of hire
|No, because sick leave is accrued|
|Benefit to Employee||Employees who don’t use their sick leave will get a year end "bonus"||Employees can rollover up to three days at year-end, so they may have up to six days accrued in two years|
|Employee Drawbacks||Employees won’t have more than three days of available sick leave if they have a major illness.||Employees lose anything over the three days of sick leave they accrued that they don’t use|
|Benefit to Employer||Employer doesn’t have to worry about rollovers, accruals or keeping track of sick time from year to year||Employers don’t have to pay for sick leave that’s not used and not rolled over|
|Employer Drawbacks||Paying unused sick leave may cause a huge year-end payroll|
You may experience more staff absenteeism early in the year
|Employers may find employees saving up paid leave and taking more time off at once when they do use it|
Employer has to calculate accruals each pay period
Sick Leave Time Off Increments
California law states that you can’t require employees to use paid sick leave in increments of less than two hours. However, as a best practice, the two-hour limit should be used only for hourly employees who are non-exempt. Consider a longer minimum, such as a half-day or full-day, for salaried exempt staff.
In fact, if you have salaried or exempt employees, you may want to recommend that sick leave be used only in full-day increments as tracking time off for exempt employees on an hourly basis, might open your business up to a claim of misclassification of exempt vs. non-exempt status. Here are additional FAQs from a California government website.
Paid Time Off vs. Sick Leave
It’s a best practice in California to track your employees’ sick leave separate from paid time off (PTO) that’s used for vacation. Some companies do this by setting up two leave policies. One for PTO, which is for vacation or any other purpose like an employee taking a “mental-health-day” or time off for a child’s school visit.
In California, unused PTO must be paid out upon an employee termination. Sick leave is not required to be paid out upon termination. In addition, providing PTO is optional while providing paid sick leave is required. If you combine the policies and allow employees to use PTO as sick time, you may find yourself obligated to pay it all out upon termination, even though sick time wouldn’t have been required to be paid out otherwise.
California Cities That Expand on State Sick Leave
Multiple cities in California have even stricter requirements for providing paid sick leave than California does as a state. Places like San Francisco triple the requirements, mandating employers pay up to 72 hours of sick leave a year, and requiring employers to allow employees to accrue sick leave starting on day one instead of day 30. Two examples are shown in the table below.
California Paid Sick Leave vs. San Francisco & Los Angeles
|Number of Employees|
|Accrual Starts On|
Many of the communities near San Francisco and Los Angeles have their own sick leave requirements. As a California business owner, look at your city or county wage and hour website to find out what the mandatory paid sick leave requirements are.
Sick Leave Risks to California Employers
Like many labor laws in California, there are risks of not complying with California sick leave laws. In fact, if your business is located in a city with stricter regulations, you have to comply with both — local (city) sick leave mandates in the location where your employees live or work as well as the state of California laws. Below are other risks.
Lack of Compliance With Sick Leave Laws
The most common issue that uniformed California businesses might encounter is not realizing they have to offer paid sick leave or they will be subject to fines and penalties. However, they must not only pay sick leave but document an employee’s earned and used sick leave balances. This is most often done by providing the accrued, used and available sick leave on each employee’s pay stub. Sick leave data can also be made available to employees online.
Other sick leave mistakes are a bit less common but certainly can be costly. Whether firing an employee for taking sick leave (prohibited), failing to keep good records (risky) or penalizing employees who don’t provide documentation (not allowed), here are examples of risks to avoid regarding managing your sick leave policy.
Don’t Require Workers to Provide Documentation for Sick Leave
Years ago, it was common for employers to require an employee to provide a doctor’s note in order to take sick leave. However, in California, this documentation is not required. In addition, the worker does not have to provide advance notice. California employers are prohibited from requiring the workers themselves to find a replacement to cover their shift. Be careful to exclude any requirements like this from your sick leave policy. In California, they violate the law.
Don’t Retaliate Against an Employee Who Uses Sick Leave
If a manager punishes an employee in any way (or worse, fires them) for using available paid sick leave, the company could be fined up to $10,000. In addition, the employer could also be ordered to pay back pay for any lost wages had the employee been suspended, demoted or terminated.
Don’t Discipline an Employee for Using Sick Leave
California doesn’t allow you to discipline an employee for taking time off for paid sick leave, such as a doctor’s appointment or illness. However, you are able to discipline your employees if they fail to notify you per your documented attendance policy (no show/no call) or if they’ve used all their available paid sick leave benefit and fail to report to work (unless they’re eligible or applied for FMLA, in which case your company leave policy takes precedence).
Other common risks that employers may encounter regarding administering a sick leave policy in California include failing to abide by record retention requirements, failing to adapt to local ordinances in addition to California requirements or not abiding by sick leave requirements in specific industries. Avoid these risks:
- Failing to keep sick leave records – three years of sick leave documents are required in California as well as other documentation retention requirements
- Offering sick leave inconsistently – failing to provide sick leave in a fair and consistent manner can be risky. For example, if some employees are allowed to use PTO while sick but others aren’t or some are allowed to use sick leave during maternity or paternity leave and others aren’t, you may be opening your business to unnecessary risk
- Not abiding by stricter city regulations – several California cities, such as San Francisco, Los Angeles, and San Diego (and surrounding communities) have their own requirements for managing sick leave, in terms of the number of hours required to be paid, eligibility rules, and accruals
- Not abiding by specific Industries exceptions – while employees in a collective bargaining unit, such as union shops, are exempt from the state sick time laws, hotel workers have their own sick leave laws as do workers in some other industries
The Bottom Line
One of the benefits of running a business in California is the beautiful climate and scenery. However, California has some of the strictest employment and labor laws in the country. Therefore, we recommend you consider outsourcing HR and legal compliance tasks to ensure you abide by California regulations and avoid unnecessary labor law audits and fines.
Zenefits is HR software that can help you stay compliant with all U.S. state labor laws, including local laws that are often stricter, such as in the San Francisco Bay area and Los Angeles County. Start with a 14-day free demo and then upgrade your HR support as your business grows and you need to offer health insurance and other benefits to your employees.