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Employment & Labor Law FLASHPOINTS June 2024

Thomas C. Garretson, Robbins Schwartz, Chicago
312-332-7760 | E-Mail Thomas C. Garretson

Chicago Publishes Final Rules for Paid Leave and Paid Sick and Safe Leave Ordinance

On May 1, 2024, the Chicago Department of Business Affairs and Consumer Protection published final rules regarding the new Chicago Paid Leave and Paid Sick and Safe Leave Ordinance, both of which are set to take effect on July 1, 2024. The new ordinance will replace the existing Chicago Paid Sick Leave Ordinance and provide covered employees with the right to earn up to 40 hours of paid sick leave and 40 hours of paid leave (usable for any reason) per 12-month accrual period. Chicago Municipal Code §6-130-030(b)(2). Below is a brief overview of the final rules that should be of interest to Chicago employers seeking to ensure compliance with the ordinance.

Benefit Year

The final rules define the “benefit year” as the 12-month period (months must be consecutive) that an employer sets for an employee to receive paid leave and paid sick leave benefits. The rules provide that an employer may set different dates for each employee or can synchronize all of its employees to have benefits granted at that same time. Examples of qualifying benefit years include: (1) anniversary date of employment; (2) calendar year; (3) contract year; (4) fiscal year; or (5) tax year. Chicago Paid Leave and Paid Sick and Safe Leave Rules Supporting Article II of Title 6, art. 1, §I, www.chicago.gov/content/dam/city/depts/bacp/OSL/bacpolspaidleaveandpaidsickleaverules07012024.pdf.

Covered Employees

The ordinance defines a “covered employee” as an employee who, in any particular two-week period, performs at least two hours of work “while physically present within the geographic boundaries of the City of Chicago.” Chicago Municipal Code §6-130-010. The final rules confirm that immigration status does not affect an individual’s status as a “covered employee.” Rule PTO 1.01. Moreover, the rules also provide that any day laborer who works at least 80 hours within any 120-day period while physically present within the geographic boundaries of the city is considered to be a “covered employee.” Rule PTO 1.02.

The rules state that only hours physically worked in the City of Chicago will count toward the accrual of paid leave and paid sick leave, so those who work outside the geographic boundaries of the city do not accrue paid leave or paid sick leave even if the employer is located within Chicago. Rule PTO 2.03. Alternatively, remote workers and those that telecommute, if meeting the definition requirements of a “covered employee,” are covered by the ordinance even if their employer is physically located outside of the geographical boundaries of the city. Rule PTO 2.03(a)(1).

Rates of Pay

The final rules provide that for employees paid on a commission basis, whether base wage plus commission or commission only, paid leave and paid sick leave must be paid to them at the hourly rate of pay based on the base wage or the highest hourly rate of the federal minimum wage, the Illinois minimum wage, or the full Chicago minimum wage (without any allowance or credit for tips), whichever is greater. Rule PTO 2.02. Employees working on commission and whose hours are not tracked are to accrue paid leave and paid sick leave in the same manner as a salaried employee.

For employees who receive gratuities, paid leave and paid sick leave must be paid to them at the highest hourly rate of the federal minimum wage, the Illinois minimum wage, or the full Chicago minimum wage (without any allowance or credit for tips). Id.

Accrual and Frontloading of Leave Time

Instead of allowing employees to accrue paid leave and paid sick leave over the benefit year, the final rules confirm that employers may elect to immediately grant paid leave or paid sick leave (or both) at the beginning of employment or the benefit year (i.e., “frontloading”). Rule PTO 2.04(a). If an employer grants an employee 40 hours of paid leave no later than 90 days after he or she begins employment, the employer is not required to provide additional paid leave or to permit carryover of the leave time beyond the benefit year. Rule PTO 2.04(b). Additionally, if the employer grants employees with 40 hours of paid sick leave within the first 30 days of employment, the employer is not required to provide additional paid sick leave but is still required to comply with the ordinance’s carryover requirements. Rule PTO 2.04(c).

Carryover of Leave Time

Unless paid leave is frontloaded, employees must be allowed to carry over up to 16 hours of accrued and unused paid leave into the next benefit year. Rule PTO 2.05(a)(1). Employees must also be permitted to carry over up to 80 hours of accrued and unused paid sick leave into the next benefit year regardless of whether the employer frontloads the paid sick leave time. Rule PTO 2.05(b)(1). The final rules state that accrual of paid leave in a subsequent benefit year is in addition to the time that is carried over (paid leave and paid sick leave) from the previous benefit year. Rule PTO 2.05(b)(2).

Requests, Use, and Payment of Leave Time

The final rules confirm that employees must be permitted to use (1) accrued paid leave by the 90th calendar day after starting employment (Rule PTO 2.06(a)(1)) and (2) accrued paid sick leave by the 30th calendar day after starting employment (Rule PTO 2.06(a)(2)). If an employer elects to offer 80 total hours of paid leave instead of designating 40 hours as paid leave and 40 hours as paid sick leave (e.g., a single “paid time off” leave category), an employee is eligible to utilize their paid leave by the 30th calendar day after starting employment. Rule PTO 2.06(b). The usage rules apply whether the employer uses the accrual method or frontloads the leave. Id.

Paid leave and paid sick leave must be paid no later than the next regular payroll period after the leave was used by the employee. Rule PTO 2.08(a). Notably, an employer is prohibited from requesting an employee waive his or her right to use paid leave or paid sick leave in exchange for receiving payment for unused leave time. Rule PTO 2.08(b).

The rules confirm that an employer may require an employee to give reasonable notice before using paid leave, not to exceed seven days. Rule PTO 2.09(a)(3). An employer may establish reasonable methods for an employee to provide notice of the need to use paid leave or paid sick leave, including the following:

  1. notifying the immediate supervisor in writing or verbally;
  2. calling a designated phone number at which the employee can leave a message;
  3. following a uniform call-in procedure;
  4. sending an e-mail to a designated e-mail address;
  5. submitting a leave request in a scheduling software system; and
  6. using another reasonable and accessible means of communication identified by the employer. Rule PTO 2.09(b).

Similarly, an employer may require an employee to obtain reasonable preapproval from the employer prior to using paid leave in order to maintain operational continuity. Denial of a paid leave request due to consideration of operational needs should include relevant factors such as

  1. whether granting paid leave during a particular time period would significantly impact business operations;
  2. whether the employer provides a need or service critical to the health, safety, or welfare of the people of Chicago;
  3. whether similarly situated employees are treated the same for the purposes of reviewing, approving, and denying paid leave; or
  4. whether the employee has “meaningful access” to use all paid leave time they are entitled to during the established benefit year, meaning that the employee has a “reasonable ability” to utilize their accrued paid leave. Rule PTO 2.09(a)(5).

Employers denying a paid leave request must do so in writing. Rule PTO 2.09(a)(4). The denial must state preestablished policy rationale and be issued to the employee immediately upon denial of their request. Id.

An employer may require certification for the use of paid sick leave if the employee is absent for more than three consecutive workdays. Rule PTO 2.11. Employers may not delay the use or payment of paid sick leave on the basis that a certification has not been received from the employee. Rule PTO 2.11(c).

Notice and Posting Requirements

The final rules provide that an employer must post a notice prepared by the Department through the employer’s “usual methods for communication for such notices” (e.g., bulletin boards, breakroom/lunchroom, internal communication channels, swipe-in locations). Rule PTO 1.03(a). However, employers that do not maintain a business location within the city and households that serve as worksites for domestic workers are exempt from this posting requirement. Id.

The ordinance requires employers to provide, with the first paycheck issued to an employee, notice of the employee’s right to paid time off. Rule PTO 1.03(b). The rules clarify that this notice may be provided to the employee before the start of their employment or as part of an onboarding process. If an employee is enrolled in direct deposit and has the option to review their pay stubs electronically, the notice may be provided to the employee via the employer’s usual methods of electronic communication (e.g., e-mail, internal communication channels, as part of employee handbook/paid leave policy). Id.

Employers can choose a “reasonable system” for giving notice to its employees of the availability and use of paid leave and paid sick leave, including, but not limited to, the following:

  1. listing updated amounts of paid leave and paid sick leave available to each employee on pay stubs or regular payroll statements;
  2. developing an online system where employees can access such information; or
  3. providing a handwritten record of available time.

If an employer chooses to frontload paid leave time, written notification of the fact and availability of the paid leave time hours must be provided to an employee at the beginning of the benefit year.

Recordkeeping Requirements

The final rules also confirm that employers are required to maintain the following records for at least five years for their covered employees:

  1. name;
  2. mailing address, telephone number, and e-mail address;
  3. occupations and job titles and whether the employee is tipped, non-tipped, or performs duties of both tipped and non-tipped positions;
  4. hire date;
  5. date employee was eligible to use paid leave/paid sick leave;
  6. number of hours of paid leave/paid sick leave accrued by or awarded to the employee;
  7. dates and number of hours each employee used paid leave/paid sick leave;
  8. rates of pay for each employee;
  9. hours worked each day and each workweek by each employee;
  10. type of payment (hourly rate, salary, commission, etc.), straight-time and overtime pay, and total wages paid to each employee in each pay period; and
  11. dates of payment of each period covered by each wage payment made. Rule PTO 1.05(a).

Complaint Procedure

An employee who believes that their employer violated the ordinance’s requirements may file a complaint with the Department. Rule PTO 3.01(a). Complaints must be filed within three years of the alleged violation. Rule PTO 3.01(d). However, if evidence exists that the employer concealed its violation or misled the employee as to his or her rights, the Department’s investigation will begin within three years of the date on which the alleged violation was discovered or should have reasonably been discovered. Id. The Department may attempt to resolve the complaint by conference, voluntary mediation, conciliation, or persuasion. Rule PTO 3.01(f). The Department will consider multiple factors in deciding the monetary fines to be assessed to an employer for violations, including whether the employer made good-faith efforts to cure, correct, or mitigate violations after receiving notice of the complaint, or whether the violations were of a technical nature and did not cause material harm to the employee(s). Id.

Employer Takeaway

While most Chicago employers have already been preparing for the ordinance’s July 1, 2024, effective date, they should be sure to closely review the Department’s final rules to confirm that their new and/or updated paid leave policies are still in full compliance with the ordinance’s requirements.

For more information about employment and labor law, see CONDUCTING THE EMPLOYMENT PRACTICES AUDIT (IICLE®, 2023). Online Library subscribers can view it for free by clicking here. If you don’t currently subscribe to the Online Library, visit www.iicle.com/subscriptions.

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