Paid Sick Leave

New Paid Leave Requirements for Chicago Employees Starting July 1 – What to Know and How to Prepare

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Authors Laura Friedel and Saman Haque

Effective July 1, 2024, employers will need to comply with new paid leave requirements that apply to all Chicago employees (including those who work from home from Chicago). The Chicago City Council passed the Paid Leave and Paid Sick and Safe Leave Ordinance (“Paid Leave Ordinance”) on November 9, 2023. Although the ordinance’s new requirements originally were slated to go into effect on January 1, 2024, an amending ordinance delayed the effective date for most obligations to July 1, 2024.

What changes take effect on July 1, 2024?

The Paid Leave Ordinance implements two separate requirements: (1) that employees earn up to 40 hours of paid leave for any purpose (“PTO”), and (2) that employees earn up to 40 hours of paid sick leave (“Paid Sick Leave”) per 12-month period. Under the ordinance, employees will accrue both PTO and Paid Sick Leave at a rate of at least one hour for every 35 hours worked. The Paid Leave Ordinance also requires that employers allow employees to carry over up to 16 hours of PTO and up to 80 hours of Paid Sick Leave each year, though employers may avoid the requirement to carry over PTO by “frontloading” the 40 hours of PTO each year (as described below).

Who is covered by the new rule?

The Paid Leave Ordinance applies to any employer with at least one employee, and to any employee who works at least 80 hours in Chicago during a 120-day period. Once an employee meets that threshold, they are deemed a “covered employee” for the duration of their employment with that employer.

Employers subject to a collective bargaining agreement with more generous paid time off should continue to comply with the collective bargaining agreement’s provisions.

What are the notice requirements?

Chicago employers must (1) post a notice of the new requirements, (2) adopt a written policy explaining PTO and Paid Sick Leave rights and responsibilities and share the policy with employees when they are hired, and (3) provide employees with PTO and Paid Sick Leave accrual and use information each pay period. Additionally, employers must provide a copy of their employment policies to workers with regular work duties in Chicago in the worker’s primary language. Finally, employers must give employees five calendar days’ notice of any changes to the PTO or Sick Leave policies and 14 days’ notice of any changes to other employment policies. Any required notices can be provided electronically with covered employees’ paychecks.

What are the requirements for employers with unlimited PTO policies?

If a Chicago employer has “unlimited” or “flexible” paid time off, the Paid Leave Ordinance requires that, at termination, they pay out 40 hours of PTO less any PTO the employee has used over the course of the previous 12 months. Employers with unlimited or flexible paid leave policies should make sure to track the use of paid time off by employees accurately to avoid paying out the full 40 hours. Employers who use an unlimited PTO policy should still give their employees notice of the law’s requirements and indicate “unlimited” on covered employees’ PTO statements.

How does the Paid Leave Ordinance impact employers with accrual-based PTO systems?

If an employer uses an accrual system, its employees must accrue both PTO and Paid Sick Leave at a rate of at least one hour for each 35 hours worked. Employers may cap accruals and use at 40 hours for each kind of leave in a 12-month period. Employers with an accrual system must allow employees to carry over up to 16 hours of PTO and up to 80 hours of Paid Sick Leave each year. Employers that use an accrual system must adopt a policy that explains the accrual rate.

What about employers with frontloading PTO systems?

Employers that frontload PTO and Paid Sick Leave must provide at least 40 hours of PTO and 40 hours of Paid Sick Leave at the beginning of each 12-month period. While employers who frontload don’t need to allow carryover of PTO into the new year, they still must carry over up to 80 hours of unused Paid Sick Leave (even though employees don’t have a right to use more than 40 hours in a year). Employers that frontload PTO and Paid Sick Leave should be aware that employees who quit early in the year will still be entitled to a payout for the full year’s allotment of PTO (or, if it is consolidated into a single bank, of the full bank).

How does the Paid Leave Ordinance impact employers outside Chicago?

The ordinance applies to Chicago employers and to employees of non-Chicago employers who physically work in Chicago for at least 80 hours in a 120-day period, including those working remotely.

Illinois employers outside of Chicago must comply with the Illinois Paid Leave for All Workers Act, which took effect on January 1, 2024. The Illinois Paid Leave for All Workers Act does not apply in Chicago or any other jurisdiction with an existing paid time off requirement. 

What should employers do to get ready for the new requirements?

Employers should:

  • Determine whether they will frontload or accrue for PTO and Paid Sick Leave.
  • Review existing policies to confirm compliance with the new ordinance and clearly explain how PTO and Paid Sick Leave will be handled.
  • Ensure payroll systems track and document time off availability and usage properly.
  • Confirm how notice will be provided each pay period.
  • Determine whether any employees who aren’t otherwise viewed as “Chicago employees” are physically present in the City of Chicago for work at least 80 hours in a 120-day period. If so, make sure they’re provided with the required PTO and Paid Sick Leave.
  • Update template separation letters to reflect new payment upon termination requirements.
  • Ensure your human resources team knows when and how PTO and Paid Sick Leave needs to be paid out.

LP’s Employment & Executive Compensation Group will host a webinar on the Chicago Paid Leave Ordinance on Thursday, May 2, 2024, from 11:00 am – 12:00 pm CDT. To register, click here.

Chicago Passes Sweeping New Paid Leave Ordinance

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Author Laura Friedel

Chicago recently passed one of the most expansive paid time off laws in the country, with significant changes and severe penalties for violations. Passed by the Chicago City Council on November 9, 2023, the Paid Leave and Paid Sick and Safe Leave Ordinance (“Paid Leave Ordinance”) takes effect on December 31, 2023, and significantly amends the current paid leave requirements.

The new Paid Leave Ordinance allows employees to earn up to 40 hours of paid leave for any purpose in a 12-month period (“PTO”) and up to 40 hours of paid sick leave in a 12-month period “(Paid Sick Leave”). Additionally, employers that accrue the time off (rather than frontloading it) must carry time over from year to year, and employers with more than 50 employees are required to pay employees out for unused PTO on termination – even if they use a flexible time off model. The new ordinance also imposes strict penalties for violations.

Who is covered by the new ordinance?

The Paid Leave Ordinance applies to any employer with at least one employee, though the requirement to pay for unused PTO on termination only applies to employers with more than 50 employees. “Covered employees” include domestic workers (regardless of whether they are employees or independent contractors) and any employees who work at least two hours in a two-week period for the employer while physically present in Chicago. Accordingly, the law may apply to remote workers who are physically present for work in Chicago occasionally.

If an employer is subject to a collective bargaining agreement with more generous paid time off provisions, the collective bargaining agreement continues to apply.

How does the Paid Leave Ordinance impact accrual and frontloading systems?

If an employer uses an accrual system, as of January 1, 2024, its employees will need to accrue both PTO and Paid Sick Leave at a rate of at least one hour for each 35 hours worked. Employers may cap accruals at 40 hours for each kind of leave in a 12-month period. Employers that use an accrual system must allow employees to carry over up to 16 hours of PTO and up to 80 hours of Paid Sick Leave each year (unused time off above those thresholds can be forfeited. Employers that use an accrual system must adopt a policy that explains the accrual rate.

Employers also have the option of frontloading PTO and Paid Sick Leave but providing at least 40 hours of PTO and 40 hours of Paid Sick Leave at the beginning of each 12-month period. While employers who front load don’t need to allow carryover of PTO into the new year, they must allow carryover of up to 80 hours of unused Paid Sick Leave. The downside of frontloading is that employees who quit in early January would be entitled to payout for the full year’s allotment, but we expect many employers will still use this approach to avoid the carryover requirement for PTO.

It’s important to note that with the December 31st effective date, employers that are not frontloading PTO and Paid Sick Leave on January 1, 2024 will need to carryover remaining balances from 2023 into 2024.

When can employees begin using their PTO and Paid Sick Leave?

Employers can require that new employees wait 30 days before they can begin using their accrued Paid Sick Leave and 90 days before using PTO. 

Can employers impose any advance notice requirements?

Employers subject to the Paid Leave Ordinance can still require employees to provide up to seven days’ advance notice for the use of PTO. They can also require seven days’ advance notice for any Paid Sick Leave that is foreseeable. Additionally, employers may require preapproval, within reason, for the use of PTO and documentation for Paid Sick Leave of more than three consecutive days.

Do employers need to pay out unused PTO and Paid Sick Leave when employment is terminated?

Employers are not required to pay out unused Paid Sick Leave upon termination, resignation, retirement, or other employment separation.

The payout rules for unused PTO differ depending on the size of the employer. Small employers (50 or fewer employees) are not required to pay out unused PTO, but medium employers (51-100 employees) must pay out 16 hours of PTO in 2024 and all accrued and unused PTO beginning in 2025. Most large employers (those with more than 100 employees) must pay out accrued and unused paid leave upon termination (or if an employee leaves Chicago).

If a Chicago employer has “unlimited” or “flexible” paid time off, the Paid Leave Ordinance now requires that, at termination, they pay out at least 40 hours of PTO less any PTO the employee has used over the course of the previous 12 months. Employers with unlimited or flexible paid leave policies should make sure to accurately track the use of paid time off by employees.

What notice requirements to employers have?

Employers must notify employees of the new law by doing the following:

  • Post a notice of employee rights in a conspicuous place at each facility and distribute the notice with the employee’s first paycheck (and annually in July after that).
  • Adopt a written policy explaining PTO and Paid Sick Leave rights and responsibilities and share the policy with employees when they are hired.
  • Provide employees with PTO and Paid Sick Leave accrual and use information each pay period.

Chicago employers must also maintain accurate records of each employee’s PTO and Paid Sick Leave use, among other information. The failure to keep these records creates a rebuttable presumption of a violation.

What are the penalties for violating the Paid Leave Ordinance?

Employers who violate the ordinance could face fines between $1,000-$3,000 for each offense, with each day of noncompliance deemed a separate offense. The penalties for notice violations are $500-$1,000 per violation.

Additionally, employees may pursue a private cause of action for violations, with possible damages of up to three times the amount of leave denied or lost, plus interest, costs, and attorney’s fees. However, private claims for PTO violations may not be brought until January beginning January 1, 2025. Employees can pursue private causes of action for Paid Sick Leave violations as soon as the ordinance takes effect on December 31.

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

Earlier this year, Illinois enacted the Illinois Paid Leave for All Workers Act, effective January 1, 2024. However, the new Illinois law does not apply in Chicago or in any other jurisdiction that had an existing paid time off requirement. 

What should Chicago employers do before the end of 2023?

Chicago employers should take the following steps immediately to make sure that they are in compliance by December 31st:

  • Determine whether you are going to frontload or accrue for PTO and Paid Sick Leave (you can treat them differently if you prefer) and if accruing, prepare for carryover from 2023 to 2024.
  • Review existing policies to ensure compliance with the new ordinance and clearly explain how PTO and Paid Sick Leave will be handled..
  • Make sure that their payroll systems are set up to properly track and document time off availability and usage.
  • Determine whether any remote employees are physically present in the City of Chicago for work at least two hours in a two-week period and, if so, make sure they’re included in the new policy.
  • Update template separation letters to reflect new payment on termination requirements and make sure team is aware that this needs to be paid out.

If you have any questions regarding Chicago’s new Paid Leave Ordinance or the Illinois Paid Leave for All Workers Act, please do not hesitate to reach out with any questions.

More Suburbs Considering Opting Out of Cook County Minimum Wage and Earned Sick Leave Ordinances

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With the July 1st effective date quickly approaching, more and more suburban communities are opting out of the Cook County minimum wage hike and paid sick leave requirements. Home Rule authority allows these local municipalities to opt out of and craft their own legislation to supersede the county legislation.

Nearly 40 municipalities have officially opted out or are expected to do so before the July 1st effective date, including: Arlington Heights, Barrington, Bedford Park, Buffalo Grove, Elk Grove Village, Elmwood Park, Glenview, Hanover Park, Hoffman Estates, Mount Prospect, Niles, Northbrook, Oak Forest, Palatine, Palos Park, River Forest, Rolling Meadows, Rosemont, Schaumburg, Streamwood, Tinley Park, Western Springs, and Wheeling.

It’s important to note that even if an employee is based in a municipality that has “opted out,” if they are performing work in Chicago or a section of Cook County that hasn’t opted out, the employee may still have a right to some paid sick leave.

Before moving forward with changes to comply with these new Cook County requirements, make sure to check where your municipality stands.

 

 

Cook County Employers Must Now Provide Paid Sick Leave

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buildingCook County has now joined the City of Chicago by passing a paid sick leave ordinance.  The Cook County Earned Sick Leave Ordinance, passed on October 5th, mandates that covered employers in Cook County, Illinois, allow eligible employees to accrue one hour of paid sick leave for every 40 hours worked, up to 40 hours of paid sick leave in each 12-month period of their employment. The Ordinance becomes effective on July 1, 2017, although, as noted below, suburbs have the ability to opt out of the ordinance and some may elect to do so.

Coverage

Individuals are entitled to benefits under the Ordinance if they:

  1. perform at least two hours of work for a covered employer while physically present within the geographic boundaries of the County in any particular two-week period; and
  2. work at least 80 hours for a covered employer in any 120-day period.

Covered employers are those with a place of business within Cook County that gainfully employ at least one covered employee. The Ordinance does not apply to collective bargaining agreements in force on July 1, 2017.

Use

Employees can use paid sick leave:

  1. for their own illness, injuries, or medical care (including preventive care);
  2. for the illness, injuries, or medical care of certain covered family members;
  3. if the employee or a family member is a victim of domestic violence or a sex offense; or
  4. if their place of business or the child care facility or school of their child has been closed by an order of a public official due to a public health emergency.

Carry Over, Restrictions on Use, Notice, Termination

Under the Ordinance, employees may carry over half of their unused paid sick leave (up to 20 hours) to the next 12-month period.

Covered employers are permitted to set reasonable minimum increments for the use of paid sick leave, not to exceed four hours a day.

Employers may require that employees provide up to seven days advance notice if the need for paid sick leave is foreseeable. If the need for leave is unforeseeable, employees must provide as much notice as is practical. The Ordinance states that employees may notify their employers of the need for leave by phone, email, or text message.

The Ordinance further provides that unused, accrued sick leave does not need to be paid out upon termination or separation of employment.

Existing Policy

If a covered employer has a policy that allows employees paid time off in an amount and a manner that meets the requirements of the new Ordinance, the employer is not required to provide any additional paid leave.

Suggested Action

Employers with operations in Cook County should review the specifics of the Ordinance and ensure compliance. At the same time, employers should also keep an eye out for paid sick leave-related resolutions in the particular suburb in which they operate. According to an opinion by the Cook County State’s Attorney’s office, suburbs may opt out of the requirements of the Cook County Ordinance, and many suburbs are already in the process of passing resolutions that will exempt their local businesses.

DOL Releases Final Rule On Paid Sick Leave For Employees Of Federal Contractors

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600px-US-DeptOfLabor-Seal_svgOn September 29th, the Department of Labor released its final rule requiring federal contractors to provide their employees with at least 1 hour of paid sick leave for every 30 hours of work, up to a maximum of 56 hours (7 days) per year.

The rule officially implements President Obama’s 2015 executive order. Once formally published in the Federal Register (which is expected to happen in the next few days), the rule will go into effect 60 days after publication. Federal contractors should take note and ensure compliance with this rule.