The Chicago Department of Business Affairs and Consumer Protection has issued a final rule that defines and clarifies various aspects of a new ordinance requiring employers to allow employees to accrue up to 40 hours of paid sick leave per 12-month period and up to 40 hours of paid leave per 12-month period that employees can use for any reason. The ordinance and final rule take effect July 1, 2024.
The Details
Here is a summary of the final rule.
Covered Employees
Under the final rule, day laborers are considered employees. Therefore, a day laborer who works at least 80 hours within any 120-day period for an employer while physically present within the geographic boundaries of the city is a covered employee.
Accrual
The final rule clarifies that only hours worked within the city of Chicago count toward accrual of paid leave and paid sick leave.
Remote workers (who meet the definition of a covered employee) and those who telecommute (who meet the definition of a covered employee) are covered by the ordinance, even if the employer is physically located outside of the geographical boundaries of the city.
Covered employees don’t accrue either leave for the hours they aren’t physically working within the geographical boundaries of the city, even if the employer is located within the geographical boundaries of the city.
For accrual, commissioned employees whose hours aren’t tracked should be treated as exempt employees would be treated
An employer isn’t required to allow accrual of leave during an employee’s use of any paid or unpaid leave.
Frontloading
If an employer grants employees the 40 hours of paid leave no later than 90 days after the employee began working for the employer, then the employer isn’t required to provide additional paid leave that can be used for any reason.
If an employer grants employees 40 hours of paid sick leave no later than 30 days after the employee begins working for the employer, then the employer isn’t required to provide additional paid sick leave.
Frontloading of paid sick leave done in this manner relieves the employer from having to follow the requirements of accrual but not of carryover.
If an employer elects to offer a single bucket of 80 hours of leave, as opposed to offering two buckets of 40 hours, the employee is eligible to use such leave by the 30th calendar day following commencement of employment. This rule applies regardless of whether the employer uses the accrual method or immediately grants paid leave at the beginning of a benefit year.
Carryover
At the end of their 12-month accrual period, employees may carryover up to:
· 16 hours of paid leave; and
· 80 hours of paid sick leave.
If an employee carries over accrued and unused paid leave to the following benefit year, accrual of paid leave in the subsequent benefit year must be in addition to the hours that were accrued and unused in the previous benefit year and carried over.
If an employee carries over accrued and unused paid sick leave to the following benefit year, the accrual of paid sick leave in the subsequent benefit year must be in addition to the hours accrued and unused in the previous benefit year and carried over.
Pay
If an employee is paid on a commission basis, the employer must pay paid leave and paid sick leave to the employee 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.
If an employee receives gratuities, the employer must pay the leave to the employee 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).
Employer Notice Requirements
Under the ordinance and final rule, employers must satisfy the following notice requirements:
Workplace Poster Notice – Employers must post the city-created notice through the employer's usual methods of communications for such notices, whether by paper posting or by electronic dissemination through the employer's internal communication channels.
Notices must be provided in English and any language spoken by employees that don’t speak English proficiently (by a significant portion of its workers who are not literate in English). For the purpose of the rule, “significant portion” means five percent or more of covered employees at a jobsite.) Notices in six languages will be provided by the Department of Business Affairs and Consumer Protection on the Office of Labor Standards website. New Hire and Annual Notice - Employers must also provide the notice with an employee’s first paycheck. Alternatively, employers may provide this notice prior to the commencement of employment or as part of an onboarding process. Employers must also provide this notice annually with a paycheck issued within 30 days of July 1. The final rules indicate that employers can also satisfy the annual notice requirement by providing the notice through the employer's internal communication channels. Annual Frontloading Notice - If an employer chooses to frontload, the employer must make written notification of the fact and the availability of the hours to an employee at the beginning of the benefit year. An employer that frontloads hours is obligated to keep its employees apprised of their available and used benefits. The final rule is silent on whether employers can satisfy this notice obligation by including this information in an employee handbook. Employer Policy and Changes to Policy - Employers must establish reasonable written paid leave and paid sick leave policies. The policies may be part of an employer manual, employee handbook or a separate document. The paid leave and paid sick leave policies must be available in English and if an employer has employees that are not literate in English, then the employer must provide the paid leave and paid sick leave policies in languages in which those employees are literate. Refer to the final rule for more details. If employers make changes to the policy, then employers must provide at least:
· Five calendar days’ written notice to employees before any change to paid leave policy notification requirements.
· 14 days’ advance written notice to employees if a policy change will affect their right to final compensation for such leave.
Notice of Available and Used Leave
Under the ordinance, each time wages are paid an employer must provide each covered employee with written notification stating an updated amount of paid leave and paid sick leave available to each covered employee for the covered employees use and the accrual rates of the paid leave and paid sick leave provided to the covered employee.
However, employers that credit their covered employees, the applicable paid leave, and paid sick leave time on a monthly basis may make such notice available on a monthly basis.
The updated amount must include accrued paid time off since the last notification, reduced paid time off since the last notification, and any unused paid time off available for use.
Employers may choose a reasonable system for providing this notification, including but not limited to, listing available paid time off on each pay statement or developing an online system where covered employees can access their own paid leave and paid sick leave information.
The final rule adds that employers may also provide a handwritten record of available time and that regardless of the method of notification to employees, employers are still required to maintain copies of these records. Employers are not required to provide notifications to an employee who hasn’t worked any hours since the last notification.
Next Steps · Chicago employers should review the final rule in full and ensure compliance with the ordinance by July 1, 2024.
· If you are tracking time off accruals in ADP TotalSource, request that per pay period accruals be displayed by contacting your ADP TotalSource service representative. Inform your representative that you need to activate per pay period accruals for your time off policy.
· If you are not using ADP TotalSource to track time off accruals, you can display per pay period accruals by requesting a new memo code from your ADP TotalSource service representative. Once created, you must manually enter per pay period accrual amounts during the payroll input.