Oregon Sick Leave Law: What Small Businesses Need To Know

Every business in Oregon—even those with just one employee—is subject to the state’s sick leave law, which requires up to 40 hours of sick time off per employee during a calendar year. Depending on the size and location of your company, sick leave may be unpaid, although some employers are required to provide paid sick leave. Oregon’s sick leave law is not as complex as laws in other states, like California, but you still need to be sure your business is compliant.

How Oregon Sick Leave Works

Oregon’s sick leave is calculated at one hour of sick time earned for every 30 hours worked, up to 40 hours. At your discretion, you may provide more sick time, but if you do, ensure that it applies for all employees. To stay compliant with Oregon’s sick time law you need to stay on top of considerations like paid vs unpaid leaves, employee entitlement, allowed sick time uses, and combining sick leave with paid time off (PTO).

Paid vs Unpaid Sick Time

Employers must provide paid sick time if they have at least 10 employees working in Oregon. If your business or any employee is located in Portland, you must provide paid sick time if you have at least six employees. If you have fewer employees, you may make the sick time unpaid, though making it paid can be an attractive benefit for a small business.

Some companies’ staff numbers may fluctuate—especially seasonal businesses that don’t have full-time workers year-round. If this fits your company, then you’ll need to calculate your daily average over any 20-week period in the previous year. If your company has a daily average of 10 or more employees (six or more in Portland), then your sick time must be paid.

Employee Entitlement & Eligibility

All types of employees—full-time, part-time, and seasonal—are eligible to receive up to 40 hours of sick time off each year from their employer. (Full-time employees must receive a minimum of 40 hours per year under this law; based on hours worked; part-time and seasonal employees may earn less.) However, as with most legal matters, there are exceptions to this rule. The following situations outline when you are not required to provide sick leave to an employee:

• When an employee is receiving sick pay under the Family and Medical Leave Act (FMLA)
• When an employee is a parent, spouse, or child of the small business owner
• When an employee is participating in a federal or state work training program
• When an employee is participating in a work study program
• When the employee is a contractor

Under Oregon law, you don’t have to provide sick time off immediately upon hiring a new employee. Like many other benefits, you can require that your employees work for you for at least 90 days before they’re eligible to take sick leave.

When an employee leaves your company, you do not have to pay out any accrued and unused sick time, unless your company has a policy explicitly stating that you pay out sick time when an employee leaves. Whatever your company policy, you must follow it every time.

Allowed Sick Time Uses

Your employees may use sick leave for several pre-approved reasons, including time off to care for themselves and specific situations where they’re caring for others.

Your employees may use sick time off for themselves for:

• Doctor appointments
• Recovery from an injury
• Sickness or illness
• Mental illness
• Bereavement
• Domestic violence, harassment, sexual assault, or similar situations

Employees may also use sick time off when they are not sick or injured to:

• Care for a sick or injured family member
• Take a family member to a doctor or mental health appointment
• Care for a sick or injured child
• Care for a child whose school or daycare is closed for a public health emergency

PTO vs Sick Leave

Some companies want to make things easier on themselves and combine their PTO and sick leave into one policy. You can do that so long as your PTO policy meets the minimum sick leave requirements for Oregon law. This does not eliminate your requirement to provide other leave that may be required under Oregon or federal law.

While combining leave policies into one broad policy can be beneficial in states without laws similar to Oregon’s, we don’t recommend taking this approach in Oregon. It’s best to have a separate PTO policy, so you can easily amend your sick leave policy should Oregon’s law change. The only time it may be acceptable to combine these policies in Oregon is if you offer your employees unlimited PTO.

Employer Requirements

Beyond providing sick time off to your employees, you need to keep accurate records of your employees’ sick time accrual and usage, provide them with information about their rights, and give them regular updates about their sick time balance.

Notice & Posting

Placing compliance posters in conspicuous places around your workplace is part of ensuring compliance with employment and HR laws. The Oregon sick time law has similar demands where you must post a sick time poster where employees can easily view it. The poster must include basic information on their sick time rights.

Oregon sick time poster in English
(Source: Oregon Bureau of Labor & Industries)

When your company is remote, however, you can post a notice in your company intranet, electronic bulletin board, or even send out a companywide email notice. If you send a regular internal newsletter, it’s a good idea to include a link to your company’s poster with each newsletter, along with any other compliance requirements.

Sick Time Balance Statements

Oregon law requires employers to provide employees with at least quarterly statements showing the amount of sick leave they have accrued and used. You can make this information available anywhere and, if you use payroll software, you can include this calculation with every pay stub, meeting the law’s requirements.

Asking for Documentation

Be careful about asking for proof that an employee was out sick or caring for an ill family member. While it may seem prudent to require documentation when an employee takes sick leave, you can only do so in the following circumstances:

• If an employee has been out for more than three consecutive working days
• If an employee’s sick time is foreseeable (surgery, medical treatment) and will be longer than three consecutive working days
• If an employee doesn’t provide adequate or reasonable notice of their sick leave (10 days if foreseeable, reasonable for an illness or injury)
• If you have a legitimate reason to question the employee’s use of sick leave (excessive absenteeism, abuse of PTO)

Accruing & Calculating Sick Time Off Pay

When building your sick time policy in Oregon, you need to ensure compliance with the law by having employees accrue time appropriately and ensuring they’re paid correctly. You have two options for accruing employee’s time: accrual and lump sum.

Accruing Sick Time Off

As mentioned above, sick time accrual requires a calculation of at least one hour of sick time for every 30 hours worked. Once an employee reaches 40 hours in their sick time bank, you can stop accruing. If your company’s sick leave policy is more generous than state requirements, you can continue accruing hours for your employees.

Even if you require employees to be employed for 90 days before they can use sick time, their accrual starts on their first day. Once they meet the 90-day requirement, then they’re eligible to use sick time.

While this accrual method allows you to have employees accumulate sick time based on their hours worked, it’s more administrative work. That also means it’s more likely to lead to administrative mistakes or miscalculations.

Lump Sum Sick Time Off

Under the lump sum method, you simply give employees the total sick time they’re allotted each year on Jan. 1. This approach is less of an administrative headache for you.

The downside to lump sum is when you have employees start anytime other than Jan. 1. In this situation, you’d need to prorate their sick time based on their start date. So, if you offer 40 hours of sick time per year and a new hire starts July 1 (the midpoint of the year), you’d need to prorate their sick time at half, or 20 hours. Even with this additional step, we find lump sum to be the better, less administrative intense, approach to calculating sick time off.

Calculating Pay

You must pay employees taking sick leave their regular rate of pay, if your company is required to pay employees for sick leave. For hourly employees, if they only receive one rate of pay, then you’ll need to pay them their regular hourly rate for every hour they take sick leave. If the hourly employee has more than one rate of pay, use the weighted average of their rates of pay.

Salaried employees must be paid the total wages earned during their sick leave. For example, if an employee receives a weekly salary of $2,500 and they took one day of sick leave, you’d need to pay them $2,000 of regular wages, plus $500 for the one day they took sick time off.

If you have commissioned employees who do not receive a base pay, then you need to pay them at least minimum wage for every hour of sick time they take off. For commissioned employees who do receive a base pay, you must pay them the rate equivalent to their hourly rate or minimum wage, whichever is greater.

While overtime, bonuses, tips, and other pay beyond an employee’s base rate do not contribute to calculating sick leave pay, shift differential pay does apply, so you need to ensure you’re calculating correctly if you have employees who fall into that category.

Employee Rollover

Oregon’s law allows employees to roll over up to 40 hours of sick time per year. Employers may also choose to limit the amount of sick leave accrual to 40 hours per year, and cap the total sick leave balance per employee at 80 hours. At your discretion, you can raise these limits.

So, if you have an employee who took no sick time last year, they can roll over all 40 hours. Once they’ve accrued their 40 hours for this year, you can stop their accrual. However, if they use sick time and their balance drops below 80 hours, you need to start their accrual again. Even if they end the year with over 40 hours of sick time, you can cap their rollover to just 40 hours.

Legal Considerations

Oregon’s sick time law is fairly straightforward but still requires attention to detail so you don’t fall out of compliance. If you calculate pay incorrectly or violate an employee’s rights under the law, you could face fines and penalties from the state, as well as employee lawsuits.

Fines & Penalties

Here’s the big one: Oregon allows for penalty wages. Failing to properly pay sick time to an employee may result in a penalty wage, which is up to eight times the employee’s regular rate of pay. Even innocent payroll mistakes can lead to this overwhelming fine.

Oregon also allows for a fine of $1,000 per violation. So, if you have three employees who take sick time, but your payroll team fails to properly calculate their sick time pay, not only will your company owe those employees eight times their regular rate of pay for each hour of sick time, you’ll also owe the state $3,000 in fines.

Using the example above, let’s look at one of those employees—say they took four hours of sick time. It will be calculated as such:

Rate of pay: $14.50 per hour
Unpaid sick hours: 4
Sick hour pay owed to employee: $14.50 x 4 = $58
$58 x 8 (state imposed additional rate for violation) = $464

In this instance, you’d owe the employee $464 for four hours of unpaid sick time, plus owe Oregon a $1,000 fine. Violating this law adds up rapidly.

Employee Lawsuits

Oregon levies harsh penalties for employers who willingly or innocently violate the sick leave law. Employee lawsuits can get even more costly for companies, both financially and reputationally.

When an employee takes sick time off, don’t retaliate against them, harass them, discipline them, or fire them. Taking any of these actions could lead to an employee lawsuit for harassment or wrongful termination.

If they have taken lots of time off or they’ve abused other policies, you may have a legitimate reason to question an employee’s use of sick time off. But, make sure you document these concerns to be sure you have proof of a legitimate concern.

Consistency & Record-keeping

As with all HR-related matters, keep detailed records. Make sure you stay compliant with the law by providing a record of each employee’s accrued and used sick time at least quarterly. Also keep any records relating to an employee’s sick time off. Because these records are medical, however, you’ll need to keep them away from the employee’s regular personnel file and put them in a confidential file with limited access.

Be fair and consistent with your sick leave policy both in the amount of time you provide, but also in how you react to employees taking leave. Remember: What you do for one employee, you need to do for all.

Bottom Line

Most companies are able to stay out of trouble with Oregon’s sick leave law. To make sure you’re in that group, know and understand what you need to provide to each employee and how to best avoid any complications.

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