BILL ANALYSIS Ó Senate Committee on Labor and Industrial Relations Senator Ben Hueso, Chair Date of Hearing: June 11, 2014 2013-2014 Regular Session Consultant: Alma Perez-Schwab Fiscal:Yes Urgency: No Bill No: AB 1522 Author: Gonzalez As Introduced/Amended: May 28, 2014 SUBJECT Employment: paid sick days KEY ISSUE Should the Legislature require employers to provide at least 3 paid sick days to any employee that works for seven or more days in a calendar year? ANALYSIS Existing law provides for various forms of unpaid and (in some circumstances) paid leave for employees. Existing law authorizes, but does not require, employers to provide their employees with paid sick leave. Any employer that chooses to provide sick leave must allow an employee to use accrued and available sick leave, in an amount not less than the sick leave that would be accrued during six months at the employee's then current rate of entitlement. Sick leave can be used by the employee for any of the following reasons: § Being physically or mentally unable to work due to illness, injury, or a medical condition of the employee. § Obtaining professional diagnosis of treatment for a medical condition of the employee. § Other medical reasons of the employee, such as pregnancy or obtaining a physical examination. § To attend to an illness of a child, parent, spouse, or domestic partner of the employee. Existing law does not require this sick leave to accrue, from one year to the next, nor does it vest. In addition, sick leave does not extend the maximum period of leave to which an employee is entitled under other leaves, such as the federal Family and Medical Leave Act, regardless of whether sick leave is received during that leave. Existing law prohibits employers from denying an employee the right to use sick leave or discharge, threaten to discharge, demote, suspend, or in any manner discriminate against an employee for using, or attempting to use, sick leave to attend to an illness of a child, parent, spouse, or domestic partner of the employee. Violation of this right entitles employees to reinstatement and actual damages or one day's pay, whichever is greater, and to appropriate equitable relief. The employee can either file a complaint with the Labor Commissioner, or bring a civil action for remedies. (Labor Code §233) Currently , San Francisco County is the only county that has passed an ordinance requiring employers to provide paid sick leave for all employees, including temporary and part-time employees, who work within the county. The San Francisco Paid Sick Leave Ordinance became effective on February 5, 2007. This Bill would enact the Healthy Workplaces, Healthy Families Act of 2014, which would require employers to provide paid sick days to employees who work seven or more days in a calendar year. Specifically, this bill would: 1) Provide that on or after July 1, 2015, an employee who works for seven or more days in a calendar year is entitled to paid sick days. 2) Specify that paid sick days accrue at a rate of no less than one hour for every 30 hours worked, and may be used beginning on the 90th calendar day of employment. 3) Provide that paid sick days may accrue and be carried over to the following year; however, employers may limit their use to 24 hours or 3 days in each calendar year. Hearing Date: June 11, 2014 AB 1522 Consultant: Alma Perez-Schwab Page 2 Senate Committee on Labor and Industrial Relations 4) Provide that "employer" includes any person employing another and includes the state, political subdivisions of the state, and municipalities. 5) Provides that an "employee" does not include: a. An employee covered by a valid collective bargaining agreement that expressly provides for paid sick days or similar policy, as specified. b. An employee in the construction industry covered by a valid collective bargaining agreement that was entered into before January 1, 2015 or waives the requirements of this bill, as specified. 1) Provides that a public authority must comply with these requirements for individuals who perform in-home supportive services, except that these requirements may be satisfied by entering into a collective bargaining agreement that provides an incremental hourly wage adjustment in an amount sufficient to satisfy the bill's requirements. 2) Require an employer, upon oral or written request of an employee, to provide paid sick days for the following purposes: o Diagnosis, care or treatment of an existing health condition of, or preventive care for, an employee or the employee's family member; or o For an employee who is a victim of domestic violence, sexual assault, or stalking as specified. 1) Define "family member" to include a child (as specified), a parent (as specified), a spouse, a registered domestic partner, a grandparent, a grandchild, or a sibling. 2) Not require an employer to provide compensation to an employee for accrued, unused paid sick days upon termination, resignation, retirement, or other separation from employment, except if an employee is rehired by the same employer within one year, any previously accrued, unused paid sick days shall be reinstated. Hearing Date: June 11, 2014 AB 1522 Consultant: Alma Perez-Schwab Page 3 Senate Committee on Labor and Industrial Relations 3) Allow an employer to lend paid sick days to an employee in advance of accrual, at the employer's discretion and with proper documentation. 4) Prohibit an employer from requiring employees to find a replacement worker as a condition of using his/her paid sick days. 5) Prohibit an employer from denying an employee the right to use sick days, discharging, threatening to discharge, demoting, suspending or in any manner discriminating against an employee for using sick days, as specified. 6) Establish a rebuttable presumption of unlawful retaliation if an employer denies an employee the right to use sick days or takes other specified adverse action within 90 days of specified protected activities by the employee. 7) Require employers to provide written notice [in various specified languages] and posting requirements, as specified, or be subject to a civil fine for not compliance. 8) Require employers to retain employee records related to used and accrued paid sick days for at least five years. 9) Require employer to include in employee wage statements any paid sick leave accrued and used pursuant to this Act. 10) Direct the Labor Commissioner to: o Coordinate implementation and enforcement of these requirements and to promulgate guidelines and regulations; o Investigate alleged violations and order appropriate relief, including reinstatement, back pay, the payment of sick days unlawfully withheld, and additional administrative penalties, as specified. o In addition to the Attorney General, bring a civil action against an employer in a court of competent jurisdiction to recover relief, as specified, including back pay, penalties, liquidated Hearing Date: June 11, 2014 AB 1522 Consultant: Alma Perez-Schwab Page 4 Senate Committee on Labor and Industrial Relations damages and attorney's fees and costs. 1) Specify that this bill establishes minimum requirements and does not preempt, limit, or otherwise affect the applicability of any other law or similar requirement that provides greater accrual or use of sick days, or that extends other protections to employees. 2) Make several findings and declarations related to employees and the need and benefits of providing for paid sick days. COMMENTS 1. Recent Research on Paid Sick Days: According to a recent study by the Economic Policy Institute, ("The Need for Paid Sick Days: The Lack of a Federal Policy Further Erodes Family Economic Security," June 29, 2011) American workers are more productive than ever before, but they are less secure in their ability to provide for their families. Workers without paid sick days-nearly 40 percent of the private-sector workforce-are among the least economically secure, and an illness forces them to take time away from work without pay and puts them at risk of losing their job. In exploring economic security for working families, the study found that a national paid sick leave policy would promote workers' financial stability and the economic security of their families. The study made the following findings: Employees without paid sick time are likely to go to work sick, where they will have reduced productivity, at a significant cost both to their employer and to their possibility for professional advancement. Without paid sick leave, parents are forced to send sick children to school, which could potentially impact their long-term health and educational performance. A two-child family with two workers earning the average wage for workers without paid sick time would lose the family's entire health care budget after just three days of missed work. A two-child family with a single working parent Hearing Date: June 11, 2014 AB 1522 Consultant: Alma Perez-Schwab Page 5 Senate Committee on Labor and Industrial Relations earning the average wage for workers without paid sick time ($10/hour) cannot miss more than three days of work in a month without falling below the federal poverty line. Taking unpaid sick time leaves workers vulnerable to losing their jobs in an economy with a stubbornly high long-term unemployment rate. These findings are echoed by another recent report by the Institute for Women's Policy Research, ("Paid Sick days and Health: Cost Savings from Reduced Emergency Department Visits," November 2011) which found, among other things, that 1.3 million hospital emergency department visits could be prevented in the U.S. each year by providing paid sick days to workers who currently lack access, reducing medical costs by $1.1 billion annually, with over $500 million in savings for public health insurance programs. 2. Background on San Francisco's Paid Sick Leave Ordinance: In 2006, San Francisco voters approved Proposition F, the first law in the nation that provided workers with the ability to earn and use paid sick days. The Paid Sick Leave Ordinance (PSLO), which became effective on February 5, 2007, allows employees (including temporary and part-time) to earn one hour of paid sick leave for every 30 hours worked. Workers earn paid sick days after three months on the job, earn up to a maximum of five days per year in small firms and nine days per year in larger firms. An employee's accrued paid sick leave carries over from year to year, subject to the applicable cap, but does not get paid out at termination. Employees are entitled to paid sick leave for their own illness or to provide care for a sick child, parent, sibling, grandparent, grandchild, spouse, registered domestic partner or other designated person. Under the ordinance, employees who assert their rights to receive paid sick leave are protected from retaliation. The City can investigate possible violations, have access to employer records, and can enforce the paid sick leave requirements by ordering reinstatement of employees, payment of paid sick leave unlawfully withheld, and penalties. Hearing Date: June 11, 2014 AB 1522 Consultant: Alma Perez-Schwab Page 6 Senate Committee on Labor and Industrial Relations 3. Update on the implementation of San Francisco's Paid Sick Leave Ordinance: A 2011 study by the Institute for Women's Policy Research, ("San Francisco's Paid Sick Leave Ordinance: Outcomes for Employers and Employees," February 2011) examined the effects of San Francisco's paid sick days ordinance on employees and employers. The report provides results from surveys of 727 employers and 1,194 employees working in San Francisco. According to the study, both city officials and employer groups have characterized the Paid Sick Leave Ordinance as having a low impact on employers and being relatively easy to implement. The following are among the report's findings: Despite the availability of either five or nine sick days, the typical worker with access used only three paid sick days during the previous year, and one-quarter of employees with access used zero paid sick days. Parents with paid sick days were more than 20 percent less likely to send a child with a contagious disease to school than parents who did not have paid sick days. Employer profitability did not suffer. Six out of seven employers did not report any negative effect on profitability as a result of the ordinance. Most employers reported no difficulty providing sick days to their employees. Approximately one-third of employers reported any difficulties implementing the ordinance, and only one-sixth needed to introduce an entirely new paid sick days policy because of the law. However, some employers (also around one-sixth) are in violation of the law and still did not offer paid sick days at the time of the survey. It should be noted, however, that although most of the feedback from the surveys in the study appear to be positive, there were some possible negative effects of increased paid sick leave. The study found that of all the workers surveyed, 15.2% experienced layoffs or had their total hours reduced; 14.1% received fewer raises/bonuses or had their benefits reduced; and 21.7% saw increased work demands. Hearing Date: June 11, 2014 AB 1522 Consultant: Alma Perez-Schwab Page 7 Senate Committee on Labor and Industrial Relations 4. Need for this bill? Given the arguments in support of paid sick leave legislation, including the public health hazard associated with the spread of illness when individuals are forced to go to work sick, it appears that a paid sick leave policy would provide great benefits to workers in the state. The Centers for Disease Control and Prevention recommends that workers who are ill "stay home from work and school" to prevent the spread of disease in the community and workplace. Unfortunately, with nearly 40 percent of the private-sector workforce having no access to paid sick days, staying home is not a luxury most people have. In California, San Francisco County is the only county that has passed an ordinance requiring employers to provide paid sick leave for all employees who work within the county. In looking at the impact of the ordinance, it appears that rates of utilization have been well below the caps of five and nine days, suggesting that employees view paid sick days as a valuable benefit that is saved and used only as needed. This bill is similar to the San Francisco ordinance and would enact the Healthy Workplaces, Healthy Families Act of 2014, which would require employers to provide paid sick days to employees who work seven or more days in a calendar year. 5. Double Referral and Staff Comments : This bill has been double referred and, if approved by this committee, it will be sent to the Senate Judiciary Committee for a hearing. Staff would like to offer a couple of points for consideration of the author as the bill progresses through the legislative process. First, the bill would require that employers provide written notice to employees as well as display a poster at the worksite, both containing the same information regarding the paid sick leave policy. The poster is to be created by the Labor Commissioner and made available to employers. Since the information to be contained in the poster is the same as the information to be included in the written notice, should the bill also direct the Labor Commissioner to create the written Hearing Date: June 11, 2014 AB 1522 Consultant: Alma Perez-Schwab Page 8 Senate Committee on Labor and Industrial Relations notice and make it available to employers for employee distribution? Regarding an employee's right to use sick days, and for clarifying purposes, the author may wish to add the word "accrued" to specify that an employer shall in no manner discriminate against an employee for using accrued sick days or attempting to exercise the right to use accrued sick days (Page 10, line 33-34 of the bill). 6. Similar Efforts at the National, State and Federal Levels: Paid sick days legislation has been proposed at the federal, state and local levels. A push for federal paid sick leave legislation began in 2004, the Healthy Families Act which proposes to ensure that all employees working 30 or hours more per week have seven paid sick days a year, has been regularly re-introduced since then but failed to advance. In total, four jurisdictions in the United States have passed local paid sick leave laws including San Francisco in 2006, Washington D.C. in 2008, Milwaukee in 2008, and the Connecticut in 2011 became the first state to pass a statewide paid sick days law. Other cities that have recently adopted paid sick days standards include Portland, New York City, Jersey City and Newark. At least twenty-two states have proposed legislation for paid sick days over the last several years. In recent years, opponents of paid sick days legislation or ordinances have begun to respond to the adoption of such policies by pushing for the enactment of "preemption" legislation that would bar any city or county within the state from establishing a right to paid sick leave. According to the Economic Policy Institute, in all, ten states have enacted such preemption measures in recent years, including Arizona, Florida, Georgia, Indiana, Kansas, Louisiana, Mississippi, North Carolina, Tennessee and Wisconsin. In 2011, the Wisconsin Legislature not only prohibited localities from establishing paid sick leave standards, but also retroactively abolished a paid sick leave measure that had been established in Milwaukee and was approved by 68 percent of voters in a 2008 referendum. 7. Proponent Arguments : Hearing Date: June 11, 2014 AB 1522 Consultant: Alma Perez-Schwab Page 9 Senate Committee on Labor and Industrial Relations According to the author and proponents, under current state law, nothing requires employers to provide paid sick days, and as a result, roughly 39 percent of the workforce earns no sick leave benefits whatsoever. That leaves seven million Californians with few options when personal or family needs arise. Proponents argue that a worker without paid sick leave is either expected to work while sick, risking the health and safety of co-workers and customers, or stay home and forego wages, jeopardizing that worker's own ability to survive. They argue that given the rising cost of living expenses, workers just cannot afford to lose a day's pay. According to the author, this bill appropriately allows workers to earn paid sick days, which they can use for personal illness, to care for a sick family member and to recover from domestic violence or assault. The author and proponents also point to studies which have found that providing sick days to workers saves money for businesses by reducing turnover, reducing the spread of illness in the workplace, and improving workers' morale and productivity. Furthermore, proponents argue that an overwhelming majority of the public believes employers should be required to offer paid sick days and point to a 2010 poll which found that 74% of adults surveyed would support a law guaranteeing paid sick days, with this position enjoying widespread support across party, gender, and ethnic lines. Finally, they argue that several local jurisdictions - and the state of Connecticut - have already passed this measure and found no adverse impact to employers; therefore, they argue that it is time to allow workers, the public, and employers access to all of the benefits offered by earned sick leave legislation. 8. Opponent Arguments : Opponents representing many large and small business associations argue that this bill would unreasonably expand employers' burdens, costs and liability. They argue that many employers already offer paid sick leave and believe that California should incentivize this practice rather than mandate it. With regards to the cost concern, opponents point Hearing Date: June 11, 2014 AB 1522 Consultant: Alma Perez-Schwab Page 10 Senate Committee on Labor and Industrial Relations out that many employers allow employees to accrue sick leave per pay period or per month, not according to the number of hours worked. Accordingly, such employers will have to completely change their policies in order to mirror the accrual rate proposed under this bill, resulting in increased cost to employers. Additionally, AB 1522 mandates that accrued sick leave carry over from year to year, a practice currently not required therefore imposing a new burden on employers. Regarding the various penalties contained in the bill, opponents argue that, while an employee should be made whole for any violation of the law, the layering of additional penalties, such as treble damages, is simply an unjustified windfall. Opponents also object to the bill's creation of a rebuttable presumption of retaliation, arguing that the burden will fall on the employer to prove that employment decisions were valid, instead of the burden falling on the employee to prove retaliation. For example, an employee who took paid sick leave returns to work the following day and is caught stealing, he/she is then terminated, however, this individual would be protected under the automatic rebuttable presumption and the burden would then fall on the employer to prove its actions were valid. Another point of concern for opponents is the new posting and notice requirements, with additional penalties for noncompliance, required in the bill which they argue puts employers at risk of litigation. Current law already requires employers to post over 15 different notices and they argue that at some point the posting of such information becomes just another added expense without any corresponding benefit to employees overwhelmed with postings. Also of concern to opponents is the requirement in the bill that gives local counties and cities authority to adopt more stringent paid sick leave requirements than is included in the bill. They argue that this provision will create inconsistency and confusion for California employers who operate in different jurisdictions. Opponents also contend that recent employer surveys of jurisdictions that have adopted paid sick leave policies Hearing Date: June 11, 2014 AB 1522 Consultant: Alma Perez-Schwab Page 11 Senate Committee on Labor and Industrial Relations indicated a negative impact on growth and jobs. They write: The Employment Policies Institute recently published a limited study on the effects of Connecticut's Paid Sick Leave law that went into place in 2012 and only applies to larger employers and non-exempt service workers. Although the survey was admittedly limited in the number of businesses evaluated, the results indicate the new law has had a negative impact on growth and jobs. Of the 156 businesses that responded to the survey, 31 of the businesses had reduced other employee benefits to balance the cost of the paid sick leave; 12 had reduced employee hours; 6 had reduced employee wages; 19 companies had raised their prices; 6 companies had laid off employees; and, 16 companies stated that they would limit their expansion in the state. Thirty-eight of the businesses surveyed also indicated that they would hire fewer employees as a direct result of the new law, while others stated they planned to offer fewer raises. Opponents conclude that rather than mandate new requirements, we should incentivize employers to offer these additional benefits by reducing costs in other areas. Among other things, they suggest offsetting the burden to provide paid sick leave by providing small employers with a tax credit for the amount expended each year on paid sick leave. Concerns have also been raised by some contractors within the construction industry regarding a one-size fits-all approach arguing that it ignores the sanctity and value of collectively bargained agreements (CBAs). They argue that the unionized sector of the construction industry operates in a "multi-employer" fashion whereby a worker often works for multiple employers in a given year. They argue that implementing this measure in the multiemployer setting is next to impossible and unfair leaving many questions answered. For example, would an employer be liable to provide paid sick leave for hours a worker accumulated working for another employer under the same CBA? For these reasons, they argue that CBAs in the construction industry should be exempted. 9. Prior Legislation : Hearing Date: June 11, 2014 AB 1522 Consultant: Alma Perez-Schwab Page 12 Senate Committee on Labor and Industrial Relations AB 400(Ma) of 2012: Held in Assembly Committee on Appropriations Similar to this bill, but not identical, AB 400 differs in that the minimum amount of paid sick days required by this bill is (3) instead of (5) and this bill does not exempt small businesses, not does it include a private right of action. AB 1000(Ma) of 2009: Held in Assembly Committee on Appropriations Also similar to this bill, AB 1000 was identical to AB 2716 (below). AB 2716(Ma) of 2008: Held in Senate Committee on Appropriations Similarly, AB 2716 would have required that employers provide paid sick days to employees who work for seven or more days in a calendar year. SUPPORT California Labor Federation, AFL-CIO (Co-Sponsor) California State Council of the Service Employees International Union (Co-Sponsor) Alameda Labor Council, AFL-CIO American Federation of State, County and Municipal Employees, AFL-CIO California Catholic Conference of Bishops California Communities United Institute California Employment Lawyers Association California Medical Association California Nurses Association California Professional Firefighters California School Employees Association, AFL-CIO California State Association of Electrical Workers California State Pipe Trades Council California Teachers Association California Work and Family Coalition Communication Workers of America, AFL-CIO, District 9 Consumer Attorneys of California Family Caregiver Alliance Hearing Date: June 11, 2014 AB 1522 Consultant: Alma Perez-Schwab Page 13 Senate Committee on Labor and Industrial Relations Health Officers Association of California Legal Aid Society - Employment Law Center Next Generation Parent Voices United Domestic Workers of America, AFSCME, Local 3930 Western Center on Law and Poverty Western State Council of Sheet Metal Workers Young Invincibles 9to5 National Association of Working Women OPPOSITION Acclamation Insurance Management Services Air Conditioning Trade Association Alhambra Chamber of Commerce Allied Managed Care Associated Builders and Contractors - San Diego Chapter Associated Builders and Contractors of California Associated General Contractors Association of California Helathcare Districts Brawley Chamber of Commerce Brea Chamber of Commerce California Asian Chamber of Commerce California Association of Health Facilities California Association of Joint Powers Authorities California Association of Licensed Security Agencies, Guards and Associates California Association of Sheet Metal Air Conditioning Contractors, National Association California Association of Winegrape Growers California Attractions and Parks Association California Automatic Vendors Council California Bankers Association California Beer & Beverage Distributors California Business Properties Association California Business Roundtable California Chamber of Commerce California Chapter of American Fence Association California Chapters of the National Electric Contractors Association Hearing Date: June 11, 2014 AB 1522 Consultant: Alma Perez-Schwab Page 14 Senate Committee on Labor and Industrial Relations California Employment Law Council California Farm Bureau Federation California Fence Contractors' Association California Grocers Association California Hotel & Lodging Association California Independent Grocers Association California League of Food Processors California Legislative Conference of the Plumbing, Heating and Piping Industry California Manufacturers and Technology Association California New Car Dealers Association California Newspaper Publishers Association California Pool and Spa Association California Professional Association of Specialty Contractors California Restaurant Association California Retailers Association California Special Districts Association California State Association of Counties California Travel Association California Trucking Association Carlsbad Chamber of Commerce CAWA - Representing the Automotive Parts Industry Cerritos Regional Chamber of Commerce Chambers of Commerce Alliance of Ventura & Santa Barbara Counties City of La Mirada Dana Point Chamber of Commerce Desert Hot Springs Chamber of Commerce and Visitors Center El Centro Chamber of Commerce Flasher Barricade Association Fountain Valley Chamber of Commerce Fullerton Chamber of Commerce Gateway Chambers Alliance Greater Bakersfield Chamber of Commerce Greater Conejo Valley Chamber of Commerce Greater Fresno Area Chamber of Commerce Greater Riverside Chambers of Commerce Greater San Fernando Valley Chamber of Commerce Huntington Beach Chamber of Commerce League of California Cities Lodi Chamber of Commerce Long Beach Area Chamber of Commerce Hearing Date: June 11, 2014 AB 1522 Consultant: Alma Perez-Schwab Page 15 Senate Committee on Labor and Industrial Relations Marin Builders Association National Federation of Independent Business Orange County Business Council Oxnard Chamber of Commerce Palm Desert Area Chamber of Commerce Plumbing-Heating-Cooling Contractors Association of California Porterville Chamber of Commerce Redondo Beach Chamber of Commerce Rural County Representatives of California San Diego East County Chamber of Commerce San Gabriel Valley Coalition San Jose Silicon Valley Chamber of Commerce Santa Clara Chamber of Commerce and Convention-Visitors Bureau Simi Valley Chamber of Commerce Society for Human Resource Management Southwest California Legislative Council Tahoe Chamber of Commerce Torrance Area Chamber of Commerce Turlock Chamber of Commerce Urban Counties Caucus Visalia Chamber of Commerce Western Electrical Contractors Association Western Growers Association Wine Institute Hearing Date: June 11, 2014 AB 1522 Consultant: Alma Perez-Schwab Page 16 Senate Committee on Labor and Industrial Relations