Chicago Finalizes Interpretive Rules In Advance Of July 1, 2024, Effective Date Of New Paid Leave And Paid Sick Leave Ordinance – Employee Benefits & Compensation

On April 30, 2024, the Chicago Department of Business Affairs and
Consumer Protection (BACP) published the final rules interpreting the Chicago Paid Leave and Paid Sick and Safe Leave
Ordinance (the “Ordinance”) which is set to take
effect on July 1, 2024. As we have previously outlined, the Ordinance will
replace the Chicago Paid Sick Leave Ordinance currently in effect.
Under the new version of the Ordinance, Chicago employees will
remain entitled to earn up to 40 hours of Paid Sick Leave per
12-month period but also will be entitled to earn up to 40 hours of
Paid Leave, usable for any reason, per 12-month period.

While the final rules are much more expansive than the set
originally proposed in December, employers will be left wanting.
The final rules do not clarify – and sometimes do not even
address – some of the unresolved issues presented by the new
Ordinance. Therefore, while preparing to implement their new or
updated paid leave policies prior to July 1, employers should take
careful note of the issues outlined below.

Definition of a 12-Month Period

The Ordinance states that “[t]he 12-month period for a
Covered Employee shall be calculated from the date the Covered
Employee began to accrue Paid Leave and Paid Sick Leave.” The
final rules take a more flexible approach, allowing employers to
establish a 12-month period of the employer’s choosing. The
designated 12-month period must be consecutive months such as
employee’s anniversary year, the calendar year, a contract
year, the fiscal year, or the tax year.

Carryover of Unused Leave

Employees are entitled to accrue up to 40 hours of Paid Sick
Leave and 40 hours of Paid Leave in a 12-month period. Employees
may carry over up to 80 hours of Paid Sick Leave and up to 16 hours
of Paid Leave from one 12-month period to the next. The final rules
confirm that any carryover is in addition to the Paid Leave and
Paid Sick Leave the employee will earn in the next 12-month
period.

In lieu of accruing time, employers may frontload 40 hours of
Paid Leave and 40 hours of Paid Sick Leave

of on the first day of the 12-month period. Frontloading
at least 40 hours of Paid Leave will alleviate the employer’s
Paid Leave carryover obligations under the law, but
– as emphasized by BACP in all caps – frontloading 40
hours of Paid Sick Leave will not alleviate the
employer’s Paid Sick Leave carryover obligations.

Denial of Requests for Paid Leave

The Ordinance indicates that employers can require employees to
obtain “reasonable preapproval” before using Paid Leave
for the purpose of maintaining continuity of business operations.
The final rules instruct employers that such a denial should
consider relevant factors such as:

• Whether granting Paid Leave during a particular time period
  would significantly impact business operations.

• Whether the employer provides a need or service critical to the
  health, safety, or welfare of the people of Chicago.

• Whether similarly situated employees are treated the same for
  the purposes of reviewing, approving, and denying Paid Leave.

• Whether the employee has meaningful access to use all their
  Paid Leave over the 12-month period.

The rules go on to suggest that a policy with some
blackout dates may be a permissible restriction on use so long as
the employee still has a reasonable ability to utilize their time
over the course of the 12-month period. However, as an example of
an over-restrictive policy, the rules outline one where Paid Leave
is only usable on Tuesdays, Wednesdays, and Thursdays.

The final rules require that denial of Paid Leave requests must
be in writing, include the pre-established policy rationale for the
denial, and be issued to the employee immediately.

Using Paid Leave and Paid Sick Leave

The final rules include a new provision which allows employers
to restrict use of Paid Leave or Paid Sick Leave to the
employee’s regular work week, which means that employees may be
prevented from accessing their otherwise available Paid Leave or
Paid Sick Leave during scheduled mandatory overtime or on
weekends.

Using PTO Policies for Compliance

Unlike the Illinois Paid Leave for All Workers Act, the
Ordinance does not contain any exemptions for pre-existing paid
leave policies. Therefore, if an employer uses a more generous PTO
policy for compliance with both the Paid Leave and Paid Sick Leave
components of the law, it must comply with the Ordinance in all
relevant respects – e.g., the shorter, 30-day use
waiting period for Paid Sick Leave must apply to the policy instead
of the 90-day use waiting period for Paid Leave.

Rate of Pay

Under the Ordinance, employees must receive their regular rate
of pay when using Paid Sick Leave and Paid Leave, which includes
continuing health care benefits if the employee receives health
care benefits from their employer. The regular rate of pay for
nonexempt employees will be calculated by dividing the
employee’s total wages by total hours worked in full pay
periods of the prior 90 days of employment. Wages do not include
overtime pay, premium pay, tips or gratuities, or commissions.

Employers will be disappointed to learn that the final rules do
not provide any guidance on this 90-day calculation.

Employer Paystub, Notice, and Posting Requirements

Under the Ordinance, as modified through the final rules,
employers must satisfy the following notice requirements:

• Notice/Workplace Poster: Post the City-created
  Notice through the employer’s usual methods of communication
  for such notices, whether by paper posting or electronic
  dissemination through the employer’s internal communication
  channels. Per the final rules, employers must post the Notice in
  other languages if at least 5% or more of employees at a jobsite
  are not literate in English.

• New Hire Notification:
  

  • Provide a notice with the first paycheck subject to the
    Ordinance or – per the final rules – prior to the
    commencement of the employee’s employment or as part of an
    onboarding process.

  
  

  • Provide written notice of the employer’s Paid Leave and
    Paid Sick Leave policies at the commencement of employment.

• Annual Frontloading Notice: Per the final
  rules, if an employer chooses to frontload time in lieu of accrual,
  the employer must make written notification of the fact and the
  availability of hours to an employee at the beginning of the
  12-month period. The rules do not clarify whether this notice
  requirement can be satisfied vis-à-vis providing the
  employer’s written paid leave policy, or if it requires
  affirmative notification to the employee of their particular
  frontloaded benefits.

• Annual Employee Notification: Provide a notice
  annually with a paycheck issued within 30 days of July 1. Per the
  final rules, the annual notice may be provided by paper or
  electronic means through the employer’s internal communication
  channels.

• Policy: Establish reasonable written Paid
  Leave and Paid Sick Leave policies which include advance notice
  procedures and the basis for denial of Paid Leave requests. Per the
  final rules, the policies may be part of a manual, handbook, or
  separate document.

• Changes to Employer Policy:
  

  • Provide at least five calendar days’ written notice to
    employees before any change to paid leave policy notification
    requirements.

  
  

  • Provide at least 14 days’ advance written notice to
    employees if a policy change will affect their right to final
    compensation for such leave.

• Available Paid Leave Notification: Provide a
  notification to employees of the availability and use of Paid Leave
  and Paid Sick Leave. Reasonable systems for notification include
  listing amounts on paystubs or payroll statements, developing an
  online system where employees can access such information, or
  – per the final rules – providing a hand-written record
  of available time.

With less than two months until the Ordinance takes effect,
employers should start making decisions about the best way for
their business to comply with these new requirements.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.