New Year, New Leaves: Chicago Passes Sweeping New Paid Leave Requirements
Wednesday, November 22, 2023

On November 9, 2023, Chicago’s City Council passed the Chicago Paid Leave and Paid Sick and Safe Leave Ordinance (the Ordinance), which will replace the city’s current sick leave ordinance and bring substantive changes to the paid leave landscape for employers with Chicago employees. The breadth of the Ordinance means that even employers who already provide more leave than the Ordinance requires may discover that their existing policies are not in compliance.

When will the Ordinance take effect?

The Ordinance will take effect on December 31, 2023, and employees begin accruing leave under the Ordinance on January 1, 2024.

How does the Ordinance interact with the new Illinois Paid Leave for All Workers Act?

Importantly, the Illinois Paid Leave for All Workers Act (PLAW), which takes effect January 1, 2024, does not apply to any employer already covered by a local ordinance requiring the employer to provide paid leave. Because the Ordinance takes effect one day before PLAW, employers in Chicago will not be subject to PLAW, at least not until or unless Chicago amends the Ordinance after January 1st. If that happens, employers will need to comply with both the Ordinance and PLAW and apply the provisions that are most favorable for employees.

What types of leave does the Ordinance require?

As the Ordinance’s name suggests, there are now two types of paid leave to which Chicago employees are entitled: paid leave, which is paid time off that can be used for any purpose (Paid Leave), and paid sick and safe leave, which can be used for certain delineated purposes (PSL).

Which employers are covered?

The Ordinance applies to each employer with at least one employee, although some provisions only apply to employers of a certain size, as discussed below.

Which employees accrue leave under the Ordinance?

Any employee who completes at least two hours of work for an employer in “any particular two-week period” while “physically present” within Chicago’s geographic boundaries is a “Covered Employee” eligible to accrue time off under the Ordinance.

Uncompensated travel time within the city does not count as hours worked, but compensated travel time does count, and includes “deliveries, sales calls, and travel related to other business activity taking place within” Chicago.

Except for certain domestic workers, independent contractors are not considered Covered Employees.

Can employers with facilities in Chicago move to the suburbs to avoid being subject to the Ordinance?

This won’t allow an employer to skirt the requirements of the Ordinance. It is not the employer’s business location but, rather, the employee’s physical presence in Chicago that triggers the Ordinance’s coverage (see definition of “Covered Employee” above).

How do Paid Leave and PSL accrue?

Paid Leave and PSL accrue simultaneously, each at a rate of one hour per 35 hours worked. Both Paid Leave and PSL accrue in full-hour increments, not in fractions of hours. Exempt employees are assumed to work 40 hours per week, unless they normally work less than 40 hours in a workweek, in which case their accrual will be based on that lower number of hours.

The Ordinance currently allows only one departure from this accrual rate: If an employer has a written policy entitling employees to more hours of Paid Leave or PSL than the Ordinance requires, the employer can credit employees with their accrued leave on a monthly basis, rather than as it accrues based on hours worked. It is unclear whether crediting Paid Leave and PSL on a different schedule, such as biweekly or semi-monthly, would be permissible under the Ordinance.

Are there accrual and usage caps?

Employers can cap the amount of Paid Leave and PSL accrued by an employee at 40 hours each in a 12-month period. However, the Ordinance does not allow employers to limit the usage of Paid Leave or PSL in a 12-month period. If the time off is available, the employee can use it.

Can employers choose what 12-month period to use?

Unlike Chicago’s current sick leave ordinance, the new Ordinance does not appear to give employers a choice regarding which 12-month period to use when tracking Paid Leave and PSL accrual, use, and carryover.

The Ordinance states that an employee’s 12-month measurement period “shall be calculated from the date the Covered Employee began to accrue” Paid Leave and PSL. And elsewhere, the Ordinance states that a Covered Employee begins to accrue Paid Leave and PSL “[s]tarting on January 1, 2024, or on the first calendar day of [the] Covered Employee’s employment.” This means that for employees who begin accruing Paid Leave and PSL on January 1, 2024, their 12-month measurement period will be the calendar year. But for employees whose first day of employment is any date other than January 1, 2024, their 12-month measurement period will be based on their anniversary year. The Ordinance is currently silent regarding whether employers can change the 12-month period so that all employees are on the same accrual schedule.

Does the Ordinance allow for waiting periods before employees may use Paid Leave or PSL?

Employers can implement a waiting period of up to 30 calendar days for use of PSL, and up to 90 calendar days for use of Paid Leave. However, these waiting periods are measured from the “commencement of the Covered Employee’s employment,” which means employees who have completed at least that amount of service time on January 1, 2024 will be able to use Paid Leave or PSL as soon as it accrues without being subject to a waiting period.

What increments of Paid Leave and PSL can employers require employees to use?

Employers may require Covered Employees to use Paid Leave in increments of no more than four hours and to use PSL in increments of no more than two hours. If an employee’s regularly scheduled workday is less than these increments, then the minimum increment that can be imposed for that employee will be the number of hours in their regular workday.

For what purposes can employees use PSL, and how much notice can employers require?

Employers will find PSL under the Ordinance similar to Chicago’s current paid sick leave ordinance (which is superseded by the Ordinance). Under the Ordinance, PSL can be used when:

  • The employee or employee’s family member is ill or injured, or for the purpose of receiving professional care, which includes preventative care, diagnosis, or treatment for medical, mental, or behavioral issues (including substance use disorders);
  • The employee or employee’s family member is the victim of domestic violence, a sex offense, or trafficking;
  • The employee’s place of business is closed by order of a public official due to a public health emergency;
  • The employee needs to care for a family member whose school, class, or place of care has been closed; or
  • The employee is obeying an order issued by certain government officials or a treating healthcare provider to stay home to minimize transmission of a communicable disease, to remain at home while experiencing symptoms or sick with a communicable disease, or obeying a quarantine or isolation order.

Just like under Chicago’s current sick leave ordinance (which, again, is superseded by the Ordinance), employees can be required to give up to seven days’ advance notice when the need for PSL is foreseeable, and “as soon as practicable” when the need for PSL is unforeseeable.

If an employee uses PSL for three or more consecutive workdays, an employer can require the employee to provide medical certification (or, in the case of non-medical reasons for PSL, other applicable evidence) supporting the need for leave.

For what purposes can employees use Paid Leave, and what requirements can employers impose on use of Paid Leave?

At first blush, the Ordinance appears to tie employers’ hands when it comes to Covered Employees’ entitlement to use Paid Leave. Paid Leave can be used for any reason, and the Ordinance prohibits employees from requesting the reason an employee uses Paid Leave or requiring documentation supporting an employee’s use of Paid Leave. In addition, employees have the right to choose whether to use available Paid Leave or PSL before using any other paid or unpaid leave provided by the employer or under Illinois law.

However, employers are not completely without rights. For instance, employers can require up to seven days advance notice of an employee’s intention to use Paid Leave. And employers also may establish policies requiring employees to obtain “reasonable preapproval” prior to using Paid Leave “for the purpose of maintaining continuity of operations.” That said, such a requirement is “subject to rules promulgated” by Chicago’s Office of Labor Standards (OLS), and such rules have not yet been published.

Is carryover required?

Yes, employees are permitted to carry over up to 16 hours of unused Paid Leave and up to 80 hours of unused PSL from one 12-month period to the next. Any unused leave beyond those thresholds is forfeited, and an employer is not required to pay it out to the employee, provided that if an employee complies with the employer’s paid leave policies, and the employer denies approval of an employee’s request to use Paid Leave and/or PSL in a manner that prevents the employee “from meaningfully having access to” their leave, additional carryover may be required.

What about carryover for FMLA-earmarked PSL?

With implementation of the Ordinance, Chicago no longer differentiates between PSL that is carried over for general use and PSL that is carried over only for FMLA use. Rather, any PSL that is carried over can be used for any purpose allowed by the Ordinance.

Does the Ordinance allow for frontloading?

Yes, frontloading is allowed. If an employer frontloads 40 hours of Paid Leave, then it does not need to track accrual or allow for carryover of unused Paid Leave from one 12-month period to the next.

If an employer frontloads 40 hours of PSL, it does not need to track PSL accrual, and employees are permitted to carry over up to 80 hours of unused PSL from one 12-month period to the next.

Do employers need to pay out unused PSL or Paid Leave upon an employee’s separation from employment?

Here is where things start to get complicated. First, the good news: just like under the current Chicago ordinance, the Ordinance doesn’t require Employers to pay out accrued but unused PSL to Covered Employees upon separation from employment.

But most employers are required to pay out accrued but unused Paid Leave to a Covered Employee upon separation from employment, including for employees who ceased being a Covered Employee during employment because they transferred outside Chicago.

The amount of unused Paid Leave to be paid out at separation will depend on the employer’s size:

Employer Size Payout of Unused Paid Leave?
50 or Fewer Covered Employees No
51 - 100 Covered Employees Yes, up to 16 hours in 2024, and then all unused Paid Leave starting in 2025
101+ Covered Employees All unused Paid Leave

In addition, a Covered Employee may request payout of their accrued but unused Paid Leave if they have not received an assignment for 60 days (a right as to which employers must provide the Covered Employee with notice, as explained below).

Wait, if Paid Leave can be used for any purpose, doesn’t that make Paid Leave “vacation time” under the Illinois Wage Payment and Collection Act that must be paid out upon separation?

It’s possible that regardless of what the Ordinance says, the Illinois Department of Labor will consider Paid Leave to be akin to “vacation time” that must be paid out upon separation from employment. The city has not issued any guidance on this issue, other than to remind employers to be aware of their obligations under the Illinois Wage Payment and Collection Act. Employers tracking PLAW will note a similar issue exists under that law as well.

What if an employer has an existing vacation, PTO, or sick leave policy that is more generous than the Ordinance?

Unfortunately, it appears that employers with existing time off policies that are more generous than the Ordinance will not escape some of the Ordinance’s requirements.

The Ordinance states that if an existing paid time off or paid sick leave policy grants employees leave “in an amount and manner that meets or exceeds” the requirements of the Ordinance, the employer is not required to provide additional amounts of paid time off or paid sick leave.

However, an employer may still need to comply with other Ordinance provisions, including limitations on how much notice employees may be required to provide and limitations on inquiring about reasons for leave. For example, a common provision in many PTO policies is to require at least two weeks’ notice before using PTO. The Ordinance, however, allows for only up to seven days’ advance notice.

Right now, it is unclear the extent to which employers may need to adjust their existing leave policies to account for the other requirements of the Ordinance. Hopefully, the OLS rules will provide some clarity and a practical approach to this issue.

Does the Ordinance address “unlimited” PTO policies?

Yes. The Ordinance says that unlimited PTO policies are permissible, but (just like policies based on an accrual) employers can require only up to seven days’ notice when the need for time off is foreseeable. And if the leave for need is not foreseeable, then notice can be required only as soon as practicable.

In addition, upon separation of employment, a Covered Employee subject to an unlimited PTO policy is entitled to be paid 40 hours of Paid Leave, less the amount of PTO the employee used “in the last 12-month period before the Covered Employee’s date of separation.”

One quirk is where the Ordinance says that employers with unlimited PTO policies “may not require a Covered Employee to obtain preapproval” before using paid time off. This would be a drastic departure from how many employers structure their PTO policies, and it also conflicts with the Ordinance’s provision allowing employers to establish policies requiring “reasonable preapproval” before using Paid Leave to maintain operational continuity. This is another area where the OLS rules will hopefully offer more guidance.

What if an employee is covered by a collective bargaining agreement?

The Ordinance does not apply to employees in the construction industry who are covered by a collective bargaining agreement (CBA), nor does it impact the terms of CBAs in force prior to January 1, 2024. However, any CBA entered into or amended after January 1, 2024, may waive the Ordinance’s requirement so long as the waiver is in “clear and unambiguous terms.” How the Ordinance will address potential preemption concerns remains unclear.

What are the employer’s notice obligations under the Ordinance?

In addition to keeping records regarding employee accrual and use of Paid Leave and PSL, employers are required to display a poster regarding the Ordinance (to be provided by the city) in the workplace. With an employee’s first paycheck, and annually thereafter with a paycheck issued within 30 days of July 1st, an employer is required to provide an employee with a notice about their rights under the Ordinance. The city also will provide a model form for this notice.

Moreover, with each paycheck, employers also must provide employees with notice of the amount of Paid Leave and PSL accrued and used since the previous such notice, as well as the amount of Paid Leave and PSL available for use. As an alternative to providing this information with each paycheck, employers may develop a “reasonable system” for employees to access this information. 

Employers also must provide employees with at least five days’ notice of any change to their Paid Leave or PSL policies. If an employee has not received an assignment from the employer within 60 calendar days, the employer must notify the employee of their right to request and receive payout of any unused Paid Leave.

What are the penalties for non-compliance?

According to the Ordinance, violations will carry fines of $1000-$3000 for each offense, except for violations of notice requirements, which will carry fines of $500 for the first offense and $1000 for each subsequent offense. In addition, employees will be entitled to treble damages for the amount of any leave wrongfully denied or lost, as well as interest, costs, and attorney’s fees.

Employers should be aware that employees will now have a private right of action under the Ordinance and, therefore, can bring civil actions for damages against their employers. For claims involving Paid Leave, the private right of action will not be available until January 1, 2025, but for claims involving PSL, a private right of action is available beginning December 31, 2023.

So, what should employers do now?

First, take a breath. Then carefully review existing policies against the Ordinance’s requirements. While compliance with the particulars of the Ordinance may seem ominous, employers may find their existing policies are already compliant with many of them. For example, the new PSL requirements are not unlike the current paid sick leave ordinance, and the carryover structure is simplified.

The primary action item required of employers may be updating existing PTO and vacation policies to account for the new limits on notice and preapproval imposed by the Ordinance. While it remains possible that the OLS rules will strike a reasonable, practical balance for existing leave policies that are more generous than the Ordinance, employers should, at the very least, review their current policies to determine what updates may be needed based on the express language of the Ordinance.

 

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