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NYC Earned Sick Time Act Amended to Broaden Terms and Coverage

March 14, 2014

New York City’s Earned Sick Time Act (“the Act”), first enacted last May, takes effect this April, but in an expanded form. The City Council recently voted to amend the Act to increase coverage to an additional 500,000 employees. The Act imposes strict conditions which will require many New York City employers to modify their sick leave and/or paid time off (“PTO”) policies. For a full review of the original Act, please see our newsletter here.

The amended Act takes effect on April 1, 2014. This presents special challenges for employers because many handbook policies incorporate sick leave into PTO, which typically begins accrual at the start of the calendar year.

The revised Act also expands coverage by reducing the threshold to require employers with five or more employees to provide up to five days of paid sick leave annually. In addition, the amendment also broadens the Act’s scope by eliminating the exemption for manufacturers. Instead of a phase-in period, which was included in the original law, Mayor Bill de Blasio has announced a six month grace period, in which employers with five to 19 workers found to violate the Act will not be fined.

Under the Act, employees are allowed to use their accrued sick time to care for a family member’s illness, injury, or health condition in addition to their own. The definition of “family member” is expanded from covering spouses, parents, and children to also include grandparents, grandchildren, and siblings.

Due to the complexity of this law, below are some helpful questions and answers we have put together as guidance:

Q:        Given that the Sick Leave law takes effect on April 1st, is the sick leave entitlement for 2014 prorated (i.e., 3.75 days for 2014 as opposed to five) or is it retroactive to January 1st?

A:        It is important to recognize that the Sick Leave Act does not require five days of sick leave to be provided; rather it requires that employees accrue sick time at a minimum rate of one hour per every 30 hours worked. Employers are then able to cap the amount of sick time at 40 hours (or five days) per calendar year.

Under the Act, employees begin to accrue time at the commencement of employment or on the effective date (April 1st), whichever is later. There are a myriad of options for employers depending on accrual rates and whether or not they have a combined PTO policy.

If the employer decides to include sick time in a PTO policy it has to set the accumulation rate for at least one hour per 30 hours worked for all PTO days. The rate will likely increase depending on the amount of PTO days the employer wants to give.

On the other hand, some employers provide their employees with a lump sum amount of PTO, but institute a waiting period before the time can be used. Under the Act, employees are entitled to begin using their accrued sick time 120 days following the commencement of their employment or on the 120th day following the effective date (April 1st), whichever is later. Therefore, the waiting period cannot last more than 120 days.

In addition, there is a carry-over provision requiring unused accumulated sick time to be carried over into the next calendar year. However, employers are allowed to cap the amount of sick time in any given calendar year at 40 hours/five days. For example, if the employee carried over three days and accumulated five more days in the new calendar year, the employer can require only five days, not eight, be paid for that year.

Q:        Is the trend among employers to separate out the sick leave in light of the new law, or to remain with PTO?

A:        It is easier to meet the requirements of the Act by separating the 40 hours from the PTO into its own policy. However, it really depends on the employer, especially considering the practical implications of keeping track of accrual.

Q:        If an employee has exhausted all of his/her PTO on vacation and then gets sick and needs to take a sick day, will the sick day have to be paid?

A:        So long as the employee is allowed to use PTO for sick leave purposes as defined by the Act, and the PTO policy meets the Act’s other requirements, the employee’s reasons for using PTO do not matter. The employer satisfied its obligations under the Act and need not provide additional paid sick time.

Q:        Is there a significant downside to continuing to pay employees for accrued unused PTO upon separation from employment?

A:        No. There is no downside, as long as the policy is drafted correctly to indicate there is a specific cap of the amount of PTO that can be accrued in a given calendar year and that any time carried over from the previous year is included in that cap. Alternatively, employers can cap the amount of unused PTO that can be paid out upon separation.

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