New Jersey’s Department of Labor just issued its final regulations adopting its final regulations applicable to New Jersey’s Earned Sick Leave Law (“ESLL”), which requires, among other things, that New Jersey employers provide their employees with up to 40 hours of paid sick leave every year. To put it mildly, these regulations suffer from what I call the three “Cs”: Complication, Confusion and Cost.
There is an awful lot in the regulations, more than we can put in one alert. Instead, we offer some important highlights for your consideration. Please call or email us if you have any questions or need our assistance.
Earning Sick Time
- Employers may advance employees the full 40 hours of earned sick leave at the beginning of the benefit year or they may require that employees accrue up to 40 hours of earned sick leave at the rate of one hour for every 30 hours worked, even if the employee's workweek is less than the standard 40 hours per week. Once an employee has accrued 40 hours in a benefit year (not counting hours carried over from the prior benefit year), their accrual stops;
- Accrual is based on “hours worked.” For purposes of eligibility, “hours worked” means hours expended in the performance of one’s job, and not pay in lieu of hours worked, such as sick or vacation pay. Note, however, that employees may not suffer a diminution of employee benefits as a result of taking earned sick leave. The Department has taken the position that any employee benefits (such as a pension or health and welfare plan) based on hours worked must treat earned sick leave pay as “hours worked.” Whether this reading is preempted by federal law is an open question;
- Where the employer uses the advancing method (as opposed to the accrual method), an employee who is out on a leave of absence at the start of the benefit year must be advanced the full 40 hours of earned sick leave on the first day of the benefit year;
- Where an employer with a 37.5-hour workweek (7.5-hour work days) chooses to require earned sick leave to be taken in full-shift increments, and where consequently, an employee is only able to use 37.5 hours of earned sick leave in a given benefit year, the remaining 2.5 hours of accrued earned sick leave are subject to the payout-carryover provisions of the new rules;
- At least as of now, employers may establish multiple benefit years rather than a single, uniform benefit year for all employees;
- Employers are not required to record hours worked for exempt employees under the Federal Fair Labor Standards Act or the New Jersey Wage and Hour Law. They may either (1) record the actual hours worked for that employee for the purpose of calculating earned sick leave accrual; or (2) presume, solely for the purpose of calculating earned sick leave accrual, that the employee works 40 hours per week;
- "Employees or employee representatives may waive the rights or benefits provided under [the ESLL] during the negotiation of a collective bargaining agreement." Note, however, that the collective bargaining agreement (“CBA”) expires without a successor agreement in place, the ESLL applies. According to the Department, the ESLL will apply even where the parties are operating under the terms of the expired CBA while negotiating a successor agreement. We therefore recommend that under these circumstances, the parties enter into an agreement extending the terms of the CBA and expressly adding the necessary waiver language.
Split Your ESLL Policy From PTO Policies
- For those employers who intend to utilize existing PTO policies which may include leave types other than sick, such as personal and vacation, to satisfy their obligations under the ESLL, beware! an employee must be permitted to use all of the PTO for any of the purposes set forth in the ESLL and the employer's PTO program must meet or exceed the other requirements of the ESLL. For this reason, employers should split their leave policies so as to have an earned sick leave policy that is complaint with the ESLL and another non-ESLL compliant policy for other types of leave;
Using Paid Leave
- The law allows employees to use earned sick leave for illnesses, but also for time needed by the employee in connection with a child of the employee to attend a school-related event requested by a school administrator, teacher, or other professional staff member responsible for the child's education. The Department observed that “a school sporting event, play, or similar activity may, under certain circumstances, constitute a permitted reason to use earned sick leave.”
- The law permits employers to “choose the increments in which its employees may use earned sick leave, provided that the largest increment of earned sick leave that an employee may be required to use for each shift for which earned sick leave is used shall be the number of hours the employee was scheduled to work during that shift. So, for example, where the employer’s policy states that ESLL paid leave may only be taken in seven hour increments (the number of hours in a shift), an employee who is scheduled to work a seven-hour shift may not take earned sick leave during that shift in an increment less than seven hours;
- Where the employee's need to use earned sick leave is foreseeable, the employer has first communicated to the employee a policy requiring seven-days advance notice of the need for foreseeable earned sick leave, and the employee has failed to provide the required seven-days advance notice, the employer may deny the employee's request to use earned sick leave;
- Employers may not ask for documentation showing eligibility for paid sick leave unless the employee is out for at least three or more consecutive work days. In the instance where an employer is permitted to request reasonable documentation, the employer may delay payout of the earned sick leave until the reasonable documentation is provided by the employee, or deny the payout of the earned sick leave if reasonable documentation is not provided by the employee;
- Employers may identify “certain dates” of expected high volume or special events where employees may not use foreseeable earned sick leave. For the purpose of identifying "certain dates" on which employees are prohibited from taking foreseeable earned sick leave, there is no limit on the number of days the employer may designate as high volume or special events;
- Employers must pay the employee for earned sick leave "at the same rate of pay as the employee normally earns. Where an employee's rate of pay fluctuates, the rate of pay for earned sick leave shall be "the amount that the employee is regularly paid for each hour of work as determined by adding together the employee's total earnings, exclusive of overtime premium pay, for the seven most recent workdays when the employee did not take leave and dividing that sum by the total hours worked during the seven-day period." Where an employee uses earned sick leave during hours that would have been overtime if worked, the employer is not required to pay the overtime rate of pay;
- The amount of a discretionary bonus is wholly within the is not required to include the bonus when determining the employee's rate of pay for earned sick leave purposes. Where the amount of a bonus is non-discretionary, it must be included in the rate of pay calculation for earned sick leave, even if the non-discretionary bonus is normally paid out quarterly or annually;
- A tipped employee's rate of pay for earned sick leave is calculated by adding together the employee's total earnings, exclusive of overtime premium pay, for the seven most recent workdays when the employee did not take leave and dividing that sum by the number of hours spent performing the work during workdays. Where it is not feasible to determine the employee's exact hourly wage for earned sick leave purposes using the method described above, the employer shall be deemed to have paid earned sick leave to a tipped employee if the rate of pay for earned sick leave is based on the agreed hourly wage, but in no event shall earned sick leave be paid at a rate less than the State minimum wage rate;
- Employees who are paid on a commission basis are be paid the State minimum wage for up to a maximum of 40 hours over the course of an entire year when they need to miss work. As one commentator who objected to this rule observed: “The commenter states, "[i]f an employee continues to earn commissions when they are out then they should not receive a windfall by being paid the minimum wage on those days." The Department disagrees.
Carry Forward and Payout
- Employers are not be required to permit the employee to accrue or use in any benefit year, or carry forward from one benefit year to the next, more than 40 hours of earned sick leave. Employers who uses the advancing method (advancing his or her employees the full complement of earned sick leave for a benefit year on the first day of each benefit year) shall either provide to the employee a payment for the full amount of unused earned sick leave in the final month of the employer's benefit year or carry forward any unused sick leave to the next benefit year." This “carry-over” may result in carrying over an employee's unused earned sick leave that the employee will never be permitted to use;
- Under both the accrual method and advancing method, the option of offering a payout of unused earned sick leave at the end of the benefit year is entirely within the discretion of the employer;
- Where the employer provides earned sick leave to its employees using the accrual method, the employer (at his or her discretion) may provide an offer to the employee for payout of unused earned sick leave. Once that offer has been made, the employee may choose either a payout of the full amount of unused earned sick leave or a payout of 50 percent of the amount of unused earned sick leave. If the employee declines a payout of unused earned sick leave or agrees to a payout of 50 percent of the amount of unused earned sick leave, the employee is entitled to carry forward to the following benefit year any unused earned sick leave, except that the employer shall not be required to carry forward from one benefit year to the next more than 40 hours of earned sick leave;
- Where the employer provides earned sick leave to its employees using the advancing method, the employer (at his or her discretion) may choose either to provide the employee a payout of the full amount of unused earned sick leave or permit the employee to carry over any unused earned sick leave, except that the employer is not required to permit the employee to carry forward from one benefit year to the next more than 40 hours of earned sick leave;
- In the case where an employer provides a payout of unused earned sick leave, the actual payment need not be received by the employee in the final month of the benefit year and may be processed and paid during a subsequent payroll period, even if such payment occurs after the conclusion of the benefit year.