Alert
10.09.2018

New Jersey signed the Earned Sick Leave Act into law earlier this year (see our previous client alert here), which requires that beginning October 29, 2018, most employees have a right to accrue up to 40 hours of earned sick leave per year.

The New Jersey Department of Labor recently released the required form of notice to be posted and distributed.  The Act requires that employers post this formal notice in a conspicuous location at their worksites.  The Act also requires that the notice be distributed to all new employees upon hire and distributed to all current employees no later than November 29, 2018.  Only the English version is available at this time, but the Department of Labor states that versions in additional other languages will become available soon.

The Department also released proposed regulations on September 13, 2018.  Public hearing will take place on November 13, 2018, and the Department is accepting written comments until December 14, 2018.  The proposed regulations attempt to address some of the deficiencies in the Act but would also create new issues, including the following:

1. Notice.  The regulations would clarify that the published Notice above can be distributed to employees by electronic mail or posted on a company’s intra-net which is readily available to employees.

2. Collective Bargaining.  The Act specifically exempts employees covered by CBAs that are either currently in effect now or signed before the Act becomes effective in October 2018.  However, even after the Act goes into effect, parties to a CBA may negotiate different paid sick leave benefits, thereby waiving the rights under the Act.  Likewise, the proposed regulations would not prevent employees and their representations from providing benefits more favorable to employees than those required under the Act.

3. Current Paid Time Off Polices.  Both the Act and regulations would confirm that any existing PTO policies could be compliant with the Act if the policies are revised to comply with accrual, use, payment and carry-over provisions.  Employees with more generous policies, however, may not wish to remove “use it or lose it policies” and therefore, may wish to have separate paid sick leave policies.

4. Foreseeable Sick Leave.  The proposed regulations elaborate on the definition of “foreseeable” explaining that it would include any predictable treatment, such as scheduled doctor’s appointments or any other regularly-occurring treatment or therapy.  The regulations also better explain of dates to which foreseeable leave can be restricted, including verifiable high-volume periods, such as holidays or special events.

5. Recordkeeping.  The regulations explain an employer’s recordkeeping requirements and would require that records be maintained either at a central office or place of employment (and would apply to sick time advanced or accrued, what is used and paid or carried over or paid out).  It is also clear that exceptions would be carved-out for exempt employees where paid sick time is advanced in a lump sum and where it is presumed that exempt employees work a 40-hour workweek.

6. Changes to Benefit Year.  The Act requires that an employer establish a Benefit Year and the proposed regulation would provide that it be a single Benefit Year for all employees, meaning an employer could not have two different Benefit Years for different classes of employees.  The proposed regulations also provide additional insight as to what a procedure would look like should an employer wish to change an established Benefit Year, including, written notice 30 days in advance identifying the current Benefit Year and proposed new Benefit Year, explaining the reason for the requested change, along with a list of current employees. 

7. Employee-status.  The regulations would apply the well-known “ABC” test as identified in New Jersey’s Unemployment Compensation Law, N.S.J.A. 43:21-19(i)(6)(A), (B), and (C) to determine employee status since employees are eligible for paid sick leave, but bona fide independent contractors are not.

8. Current Policies.  If employees have already accrued paid time for sick leave under employer policies, employees should be permitted to use this sick time for any reason under the Act until an employer’s first Benefit Year begins.9. Carry-Over.  The Act provides that an employee may accrue, use and carryover up to forty hours of paid sick time; however, the regulations omit the words “use” and “carry-over” eliminating the amount of paid sick time which can be used and/or carried over creating a conflict with the Act and, theoretically, resulting in an employee having unlimited sick time “bank.”  The proposed regulations would also clarify an employer’s obligation to “carry-over” paid sick time:

a.  Accrual Method - In cases where paid sick leave is accrued, an employer may provide an offer to an employee for a payment of unused earned sick leave at the end of the benefit year.  The employee shall choose, no later than 10 calendar days from the date of the employer’s offer, whether to accept or decline a payment.  If the employee agrees to receive a payment, the employee shall choose a payment for the full amount of unused earned sick leave or for 50 percent of the amount of unused earned sick leave.  If the employee declines a payment for unused earned sick leave, or agrees to a payment for 50 percent of the amount of unused sick leave, the employee shall be entitled to carry forward any unused or unpaid earned sick leave.  If the employee agrees to a payment for the full amount of unused earned sick leave, the employee shall not be entitled to carry forward any earned sick leave to the proceeding benefit year. 

b.  Lump Sum Method - In cases where an employer choses to award or front-load paid sick leave at the beginning of a benefit year (in lieu of requiring accrual), employers can bypass the offer/acceptance procedure above and, at their discretion, may either “carry-over” or pay out paid sick leave balances at the end of each Benefit Year.

10.  Multi-state and Out-of-state Employers.  The Act and proposed regulations provide no guidance as to multi-state and out-of-state employers.  The Act provides that employers doing business in New Jersey are required to provide paid sick time to employees performing work in New Jersey.  The regulations provide no guidance as to situations where employees may be based in other states but perform work in New Jersey.  Likewise, it is also unclear whether employees performing services for out-of-state employers from their homes in New Jersey or on temporary projects in New Jersey will be covered.

11.  Newly-Hired Employees in the Middle of a Benefit Year.  Providing employees with a lump sum at the beginning a Benefit Year is preferable on many administrative levels, but the Act and proposed regulations do not provide any clarity as to how to treat a newly-hired employee in the middle of a Benefit Year.  For example, there is no guidance as to whether employers can pro-rate or permit newly-hired employees to accrue monthly during the remaining Benefit Year and then receive a lump sum at the beginning of the next Benefit Year.  This issue is most concerning to employers wishing to pay out paid sick leave at the end of a Benefit Year but less so for employers who simply permit carry-over.

12.  “Hours Worked”.  The regulations would require time spent on paid sick leave count as “hours worked” creating ambiguity with seniority rules, wage and hour requirements for overtime, contributions towards welfare benefit funds or under ERISA.  The proposed regulations, as written, make it unclear whether not working but receiving paid sick time would count as hours worked towards overtime or pension or retirement plans.  Federal statutes may also preempt the Act to the extent of any conflict.  While we do not believe that this is the lawmakers’ intention, it does create ambiguity.

13.  Exhaustion of Paid Sick Leave.  The regulations would make it unlawful for an employer to require an employee to exhaust paid sick leave, which is not provided for in the Act and would be in direct conflict with the federal Family Medical Leave Act’s provision which expressly permits such a practice.  A restriction against exhaustion would also create a problem if an employee wishes to take a sick day but not be paid.

14.  Retaliation.  The proposed regulations would provide for a presumption of violation if any adverse action occurs within 90 days of paid sick leave.  This could create a situation where any adverse action, such as a performance review or discipline, could then shift the burden of proof to an employer as to why the action is not retaliation.

15.  Penalties.  The proposed regulations would provide for certain penalties and fines in the case of a violation and a procedure for hearings.

The Bottom Line
Employers should post the attached Notice in a conspicuous place in their workplaces and distribute to all current employees.  Employers should also add the notice to their new-hire orientation paperwork.  As the regulations proceed through the notice and comment phase, we will provide further update as to their content and status.

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