COVID-19 Supplemental Paid Sick Leave: New California State COVID Leave Law Applies to all California Employers with 26 or More Employees
On February 9, 2022, Governor Newsom signed the new COVID-19 Supplemental Paid Sick Leave law (SB-114), which is retroactive to January 1, 2022 and extends through September 30, 2022.
Similar to the previous law that provided COVID-19 supplemental paid sick leave and expired last year, the new COVID-19 Supplemental Paid Sick Leave law requires employers in California with 26 or more employees to provide up to a total of 80 hours of paid sick leave to employees for certain COVID-19 related reasons. While we expect updated FAQs on the new law from the DIR soon, the key details from the statute are included below.
- 26+ Employees: The law requires employers with 26 or more employees to provide supplemental paid sick leave for certain COVID-19 related reasons.
- Retroactive to January 1 and through September 30: The requirement to provide the paid sick leave will take effect on February 19 (10 days after the law was signed by the Governor), at which point it will be retroactive to January 1 and extend until September 30, 2022. Employers are required to provide retroactive payments to any employees who were provided with an unpaid leave for qualifying reasons since January 1 at the request of the employee (either orally or in writing). The retroactive payment must be paid on or before the payday for the next full pay period after it is requested by the employee.
- Two Categories of Paid Leave (up to 40 hours each): The new supplemental paid sick leave is split into two categories – the first allows employees to take up to 40 hours of leave for COVID related reasons similar to the prior law, and the second allows employees to take an additional 40 hours of leave if they or their family member test positive for COVID-19.
- First Category: Employers must provide up to 40 hours of supplemental paid sick leave for employees that are unable to work or telework due to any of the following reasons:
- Employee is subject to quarantine or isolation order or guidelines due to COVID-19;
- Employee is advised to quarantine or isolate by heath care provider;
- Employee is attending an appointment for themselves or a family member to get a vaccine or booster and/or experiencing symptoms from a vaccine or booster or caring for a family member who is experiencing symptoms from a vaccine or booster (limit of 24 hours per vaccination/booster – see below);
- Employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
- Employee is caring for a family member who is subject to quarantine, or has been advised to isolate;
- Employee is caring for a child whose school or child care is closed or unavailable due to COVID-19.
- Second Category: Employees who test positive for COVID-19, or have to care for a family member who tests positive, are entitled to an additional 40 hours of supplemental paid sick leave. Employers can request proof of a positive test for the employee or family member prior to providing the supplemental paid sick leave. If an employee refuses to get tested or provide test results to the employer, employers are not obligated to provide the additional 40 hours of supplemental paid sick leave. Employers can require documentation of a positive COVID test for retroactive payments requested by the employee as well. Employers are required to pay for the test for employees, but it is unclear if employers will also be required to pay for tests for family members of employees.
- Amount of Leave: Full-time employees that work at least 40 hours per week on average are entitled to 40 hours of supplemental paid sick leave under each category, for a total of 80 hours of supplemental paid sick leave. Other non-full-time employees are entitled to the average amount of hours they normally work over a 14-day period.
- 24-hour Limit for COVID Vaccine/Booster: Employers can limit the supplemental paid sick leave an employee can use for each vaccine or booster and any related side effects, for themselves of a family member, to three days (24 hours), unless the employee provides verification from a healthcare provider that the symptoms are continuing after three days.
- Amount of Pay: Supplemental paid sick leave should be paid at the employee’s regular rate of pay, up to a maximum of $511 per day and no more than $5,110 total per employee. An employee’s regular rate includes any commissions or non-discretionary bonuses.
- Must List Amount Used on Wage Statements: The COVID-19 Supplemental Paid Sick Leave is a separate entitlement from other paid sick leave provided by the employer and must be listed separately on the written notice or wage statement provided to employees each pay period. However, instead of listing the available balance of supplemental paid sick leave, employers are only required to list the amount of leave that has been used to date. If an employee has not yet used any leave, their statement should list “zero.”
- Cannot Require Substitution of Other Leaves: The supplemental paid sick leave is in addition to other paid leave. Thus, employers cannot require employees to substitute their vacation, PTO, or other paid sick leave when using supplemental paid sick leave.
- Distinct from Cal/OSHA ETS Exclusion Pay: Employers cannot require employees to first exhaust their supplemental paid sick leave when exclusion pay is required to be paid under the Cal/OSHA ETS. Based on this, it appears employers cannot apply these hours toward the exclusion pay obligation when employees are required to be excluded from the workplace due to a workplace exposure to COVID-19 but we expect clarification on this requirement in the forthcoming FAQs.
- Notice Requirement: The Labor Commissioner is required to make a model notice available for employers to send to employees, which should be available shortly. The notice should be posted in the workplace and must be emailed to employees who do not frequent a workplace.
COVID-19 Leave: Employer Obligations After September 30
State and Federal COVID-19 Leave Laws Are Set to Expire on September 30, 2021
As of the date of this article, both the federal and the California COVID-19 leave laws are set to expire on September 30, 2021 and it does not appear that either the State or Federal legislatures will be extending these provisions. The California law, SB-95, requires employers with 26 or more employees to provide up to 80 hours of supplemental paid sick leave for COVID-19 reasons from January 1 to September 30, 2021. The American Rescue Plan Act, which was passed by Congress earlier this year, extended the ability of employers to take a tax credit against their payroll taxes for offering leave to employees for COVID-19 reasons through September 30, 2021. Additionally, the optional COVID-19 related leaves under the federal law, Emergency Paid Sick Leave and Emergency FMLA, both expire on September 30.
After September 30, 2021, employers with 26 or more employees will no longer be required to provide the COVID-19 supplemental paid sick leave under California law. Employers of any size may still choose to put their own COVID-19 policies in place that provide pay for employees who miss work for COVID related reasons, however, employers will no longer receive a tax credit for those payments.
California’s law required employers to initially give notice to employees regarding the availability of the COVID-19 supplemental paid sick leave and the time period of the leave. However, employers may want to remind employees that the leave is expiring on September 30. Note that if an employee is already taking COVID-19 supplemental paid sick leave at the time the leave expires on September 30, they are permitted to take the full amount of leave that they are entitled to even if it extends past September 30.
Employer Pay Obligations After September 30
Although employers will no longer be required to provide separate supplemental paid sick leave for COVID-19 purposes after September 30, under the Cal/OSHA Emergency Temporary Standards (“ETS”) employers must maintain all pay and benefits for employees who are required to be excluded from the workplace due to COVID-19 and otherwise able to work. Employees may choose to use their regular paid sick leave during the exclusion period; however, employers cannot require employees to use their regular paid sick leave.
The exclusion pay is only required for cases of workplace exposure to COVID-19, therefore, if employers are able to show that an employee’s exposure to COVID was outside the workplace no exclusion pay is required in that case. Employers also do not have to pay an employee that receives disability payments or worker’s compensation during the exclusion period. For more information on the Cal/OSHA ETS exclusion pay you can access the DIR’s FAQ page here.
Additionally, many employers are now requiring vaccinations and/or regular COVID-19 testing as a condition of employment. If employees are required to receive the vaccine as part of their job, employers must pay for the cost of the vaccine, if any, and the time it takes the employee to get vaccinated. Further, the DIR issued an FAQ on COVID-19 testing that states that employers must pay for the cost of COVID-19 testing if it is a requirement of the job. This includes paying for the test itself, the time it takes the employee to get tested (including any travel time), and reimbursing employees for travel expenses if the testing location is not at their regular workplace. You can read the DIR’s full FAQ on COVID-19 testing here.
Employee Leave Options After September 30
Even though the State and federal COVID-19 leaves are expiring on September 30, many employees will still need to take time off from work for COVID-19 related reasons. Unless their employers have their own COVID-19 policies in place, much of this time off work may be unpaid.
If an employee is sick with COVID-19 symptoms or is caring for a family member who has COVID-19 symptoms, they can use their regular California paid sick leave if they have accrued time available. Employees can also take family and medical leave under CFRA to care for themselves or their family members if their symptoms rise to the level of a serious health condition. Leave under CFRA is unpaid but employees may qualify for disability insurance from the state.
Regular Rate Blues: California Supreme Court’s Decision on Premium Payments and Other Pay Practice Reminders
On July 15, 2021, the California Supreme Court decided in Ferra v. Loews Hollywood Hotel, LLC that employers must pay premium payments to employees for missed meal, rest, and recovery breaks at the employee’s “regular rate of pay” instead of the employee’s base hourly rate, as many employers were doing. The ruling is retroactive, and employers should audit their practices to determine if a true-up payment is necessary.
Under California wage and hour laws, an employer must provide and permit nonexempt employees who work more than five hours in a day an unpaid duty-free meal period of at least 30 minutes in length starting no later than the end of the fifth hour of work. Employees who work no more than six hours in a day may waive the meal period upon written agreement between the company and the employee. In addition, nonexempt employees who work at least three and one-half hours in a day must be provided and permitted a paid 10-minute duty-free rest period for every four hours of work or major fraction thereof, and a second rest period if working up to six hours a day. Employees who work outdoors are entitled to cool-down recovery periods in fixed, shaded areas whenever needed to prevent heat illness.
If an employer doesn’t provide compliant meal, rest, or recovery periods, the employer must pay the employee one additional hour of pay as a “premium” for each workday that the meal, rest or recovery period was not provided. (Labor Code § 226.7.) Before the recent ruling, it was unclear whether this premium should be paid at the employee’s base hourly rate or their “regular rate of pay” which includes all nondiscretionary incentive payments such as bonuses and commissions. The Court settled this issue: the premium must be paid at the regular rate of pay, not the base rate. This is bad news for employers that acted in good faith by paying premium pay at the base hourly rate.
How To Calculate “Regular Rate of Pay”
Regular rate calculation requires employers to include all compensation for hours worked and divide that number by the total hours worked. “All compensation” includes hourly wages, nondiscretionary bonuses, shift differentials, on-call pay, and commissions. In general, most bonuses are considered nondiscretionary and include any bonus that employees know about and expect such as: production bonuses, bonuses for quality of work, bonuses to induce employees to work more efficiently, attendance bonuses, and safety bonuses. Thus, if nonexempt employees are paid a commission, non-discretionary bonus, or other incentive payment, such payment must be factored into the employees’ regular rate in order to compute any applicable overtime or break premium compensation.
Different Rule for Flat Sum Bonus: Note that California law requires the use of a different rule for calculating “regular rate of pay” when employees earn a non-discretionary, flat sum bonus. A flat sum bonus is typically a bonus paid for working a shift that is not tied to any measure of production or efficiency, for example a flat sum bonus for working on a weekend. When calculating the regular rate of pay from a flat sum bonus, the bonus is divided by only the regular, non-overtime hours worked in the workweek instead of all hours.
For examples showing regular rate calculations you can review the Labor Commissioner’s website here.
When To Use Regular Rate
The regular rate of pay is used when calculating overtime, California paid sick leave (see sick leave section below) and now meal and rest pay premiums.
Overtime “True Up” Calculations
If the employees’ bonus or commission is paid out on a weekly basis, the calculation is simple and the additional pay is added to all other wages earned in the workweek and then divided by the total hours worked in that workweek to come up with the regular rate. However, the majority of bonuses and commissions are not paid on a weekly basis and are more often earned and calculated on a monthly or quarterly basis.
If employees earn nondiscretionary bonuses or commissions on a monthly, quarterly, or other non-weekly basis, the amount of the bonus or commission earned must be spread out over the period it was earned by the employee for purposes of the overtime calculation. Employers must apportion the bonus or commission payments to each workweek during the period the amount was earned on a pro rata basis. Once that is done, employers must then recalculate any additional overtime amounts that may be owed over the period the bonus or commissions was earned, and “true up” the amount by paying the employee the difference.
The true up process for overtime or premium payments should be done whenever the bonus or commission payments are made to employees. Any additional overtime or premium amount owed to employees should be paid at the same time as the bonus or commission or in the following pay period. If you have questions regarding the method of calculating the regular rate or “truing up” payments, you should work with legal counsel to ensure employees are being compensated appropriately.
Paid Sick Leave Pay for Hourly Employees Is Also Regular Rate
An often-overlooked provision of California’s paid sick leave law is that the rate of pay for paid sick leave for hourly (non-exempt) employees is also the regular rate, not the straight hourly rate of employees. This is different than how an employer usually pays vacation or PTO time, so it can often slip by even the most seasoned of HR professionals and payroll personnel.
Nonexempt employees must be paid their regular non-overtime hourly rate for the amount of time taken as paid sick leave. To determine the rate of pay for nonexempt employees taking sick leave, the employer may either:
- Calculate the regular rate of pay for the workweek in which the employee used paid sick leave, whether or not they actually worked overtime in that workweek (see above; this is calculated like the “flat sum” bonus), or
- Divide your total compensation for the previous 90 days (excluding overtime premium pay) by the total number of non-overtime hours worked in the full pay periods of the prior 90 days of employment
For exempt employees, paid sick leave is calculated in the same manner the employer calculates wages for other forms of paid leave time (for example, vacation pay or PTO).
This is a good time for employers to review their pay practices and contact their legal counsel to determine what, if any, corrections should be made. Because the ruling is retroactive, there may be an increase in litigation surrounding meal and rest breaks. It is important to be proactive in evaluating risk.
U.S. Supreme Court Rules Against Union Access to Agricultural Employer’s Land
On June 23, the U.S. Supreme Court held that a California regulation allowing union organizers to enter an agricultural employer’s property is unconstitutional. The regulation, on the books since the mid-1970s, requires farms to permit unions to speak with and recruit farmworkers in the hour before and after work and an hour during lunchtime for up to 120 days each year. (Cedar Point Nursery v. Hassid (U.S., June 23, 2021, No. 20-107) 2021 WL 2557070.)
In the case, a strawberry plant nursery and a fruit shipment company sued the California Agricultural Labor Relations Board arguing that the regulation gave farmworker unions an easement to enter and conduct business on their land without authorization or compensation. The Court agreed, holding that the regulation took away the agricultural employer’s right to exclude trespassers from its private property, amounting to a “taking” of company property without “just compensation” in violation of the Fifth Amendment.
With the regulation essentially gone (barring the unlikely scenario that the government or the unions decide to pay farms for access to their workers), labor unions will have to find alternative means to communicate with and recruit agricultural union members. This ruling is hailed as a resounding victory for agricultural employers. For more information about this contact Sarah Hirschfeld-Sussman or anyone on DP&F’s employment team.
More Hoops: EDD Wants Employers to Report AB 1513 Safe Harbor Payments For All Past Quarters
Employers who paid safe harbor payments under AB 1513 are facing a new vexing, last minute challenge. Although the payments were taxable wages to employees and former employees for the tax year 2016, the California Employment Development Department (“EDD”) recently issued a notice that employers who made these payments must report the back payments for the quarters for which they were made. The EDD is expecting employers to not only submit a DE 9 (Quarterly Contribution Return and Report of Wages) and pay the contributions for the 2016 quarter that the back pay was made, but also submit a DE 9c for the quarters in which the employees earned the back pay and should have been paid (back to July 2012). To add insult to injury the forms cannot be electronically filed. Employers must mail the forms to a specific address. The EDD’s notice is attached here.
For more information on this and other AB 1513 issues contact Jennifer Douglas Phillips.