The City of Chicago recently enacted a new Paid Leave and Paid Sick and Safe Leave ordinance which goes into effect December 31, 2023. The update is notable because it goes well beyond the recently passed Illinois Paid Leave for All Workers Act (discussed here), with Chicago now mandating that employers provide Chicago employees: (1) at least 5 days (40 hours) of paid sick/safe leave per year; and (2) at least 5 days (40 hours) of regular paid time off (PTO) per year. This new scheme makes Chicago’s mandate one of the – if not the – most expansive PTO requirements in the country. We highlight some of the key aspects of the new ordinance for Chicago employers below:
- Employee Coverage: The leave requirements apply very broadly to any employee who “in any particular two-week period, performs at least two hours of work . . . while physically present within the geographic boundaries of [Chicago].” Employers should thus consider whether employees who may not routinely work in Chicago but who may work there occasionally are subject to the ordinance. Where employees are subject to a collective bargaining agreement that provides more favorable terms than the ordinance, the collective bargaining agreement controls.
- Accrual or Frontloading: For employers utilizing an accrual system, starting January 1, 2024, employees will begin accruing both PTO and sick/safe leave time at one hour per 35 hours worked, and employees may cap accruals under each type of leave at 40 hours. Employee accruals (and caps) are measured across 12-month periods (which begin when the employee starts accruing time). While employers can utilize a 40 hour cap for each leave type, the ordinance does not allow for a “use” restriction (i.e., if an employee has carried over additional time beyond 40 hours, as discussed below, the employee would be able to use as much time as they have accrued in a single 12-month period).
Employers may also utilize a frontloading system whereby the employer frontloads at least 40 hours of PTO and 40 hours of paid sick/safe leave at the beginning of the 12-month period. Employers using a frontloading system do not have to permit carryover of PTO into the New Year, but they must permit carryover of unused paid sick/safe leave.
- Use Eligibility: Under the ordinance, employees may use PTO for any purposes of the employee’s choosing and may use paid sick/safe leave for the various sick/safe leave purposes enumerated under the law (including when the employee, or the employee’s family member, is ill, injured, or receiving professional care; or when the employee needs time for domestic violence-related issues). Eligible employees may start using their accrued sick/safe leave no later than 30 days after commencing employment, and employees may start using accrued PTO no later than 90 days after commencing employment.
- Employee Notice, Preapproval, and Documentation: Chicago employers may still adopt reasonable policies requiring employees to give prior notice for use of both PTO and the foreseeable need for paid sick/safe leave (with such notice requirements not to exceed 7 days), and employers may also reasonably require preapproval for the use of PTO. While employers may not require any documentation related to use of general PTO, employers can require various certifications that the employee has used paid sick/safe leave for a permissible purpose after the employee is absent for more than 3 consecutive workdays.
- Carryover: Importantly, employers using an accrual system must allow employees to carry over up to 16 hours (2 days) of PTO each year and up to 80 hours (10 days) of paid sick/safe leave each year. As mentioned above, employers using a frontloading system are not required to allow carryover of PTO, but must allow carryover of up to 80 hours (10 days) of paid sick/safe leave each year (though employers can limit future paid sick/safe leave accruals based on the 40 hour annual cap system detailed above).
- Payout at Termination: Most large employers must pay out accrued but unused PTO upon termination or when an employee leaves Chicago, though there is still no requirement to pay out accrued but unused sick/safe leave upon termination. “Small” and “medium” sized employers (which the ordinance defines as employers with 50 or fewer and 51-100 employees respectively) are subject to different payout rules – small employers have no payout obligation, and medium-sized employers must pay out only 16 hours (2 days) of PTO in 2024, then must payout all accrued but unused PTO starting in 2025.
- Unlimited PTO Policies: In a twist, Chicago has addressed the application of these rules to employers with “unlimited” PTO policies. Chicago will now require employers with “unlimited” PTO plans to pay out at termination up to 40 hours of PTO, less any PTO the employee has actually used over the course of the past 12 months. For instance, if an employer with an unlimited PTO plan terminates an employee who has only used 3 PTO days over the course of the prior 12 months, the employer would be required to pay out the equivalent of 2 days of PTO at separation. But if the employee has used 5 or more days of PTO during the prior 12 months, no payout will be required. Employers with “unlimited” PTO policies should therefore be careful to track the actual use of PTO by employees as such tracking will become essential in a termination setting or where the employee leaves Chicago (and will otherwise be required by recordkeeping obligations, as noted below).
- Notice Obligations and Recordkeeping: Employers will have several notice requirements under the ordinance, including that employers must:
- post and distribute a notice of employee rights (which will be provided by the city) upon the ordinance’s enactment, contemporaneously with an employee’s first paycheck, and annually thereafter between July 1st-31st;
- have a written policy explaining PTO and paid sick/safe leave entitlements and rules;
- share the written policy with employees at the time of hire and prior to making policy changes; and
- provide employees with leave accrual and usage information each pay period.
Chicago employers must also keep accurate records of each employee’s name, address, hours worked, pay rate, wage agreement, PTO and sick/safe leave hours provided, dates when PTO and sick/safe leave hours were used, and any other compliance records for at least 5 years. If an employer does not maintain records regarding this information, there will be a rebuttable presumption of a violation. Employers must also provide these records to an employee upon their request.
- Interplay with Illinois Law: The new Chicago requirements will replace the pre-existing paid sick and safe leave requirements in the city. Chicago employers should also be aware of the interplay between the new Chicago requirements and any applicable Illinois state law. Before Illinois’ enactment of its Leave for Any Purpose Law (which becomes effective January 1, 2024), the state did not have a paid sick leave or general paid time off law. But the Illinois Leave for Any Purpose Law exempts from coverage any employer located in a municipality or county where the employer is required to provide municipal or county paid leave time – accordingly, Chicago employers will not be subject to the general Illinois law and will not have additional PTO or paid sick/safe leave compliance obligations under the alternate Illinois law.