BILL ANALYSIS Ó AB 304 Page 1 Date of Hearing: April 22, 2015 ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT Roger Hernández, Chair AB 304 Gonzalez - As Amended April 14, 2015 SUBJECT: Sick leave: accrual and limitations SUMMARY: Makes a number of changes to legislation enacted last year related to paid sick days. Specifically, this bill: 1)Provides that the definition of "employee" does not include specified retired annuitants. 2)Provides that the definition of "employee" does not include employees covered under the federal Railroad Unemployment Insurance Act. 3)Specifies that the law applies to an employee who works in California "for the same employer" for 30 or more days within a year. 4)Amends the law to provide that an employer is not required to provide additional paid sick days if the employer has a paid leave policy or paid time off policy, the employer makes available an amount of leave that may be used for the same purposes and under the same conditions of the existing paid AB 304 Page 2 sick days law, and the policy does either of the following: a) Satisfies the accrual, carry over, and use requirements of the law. b) Provides no less than 24 hours or three days of paid sick leave, or equivalent paid leave or paid time off, for employee use at the beginning of each year of employment, calendar year, or 12-month period. 5)Provides that an employer is not required to reinstate accrued paid time off to a rehired employee that was paid out at the time of termination, resignation, or separation of employment. 6)Provides that if an employer provides unlimited paid sick leave or unlimited paid time off, the employer may satisfy a specified written notice requirement of existing law by indicating on the notice or the employee's itemized wage statement that such leave is "unlimited." 7)Delays application of provisions related to the inclusion of the amount of paid sick leave available on itemized wage statements or separate writings until January 21, 2016 for employers in the broadcasting and motion picture industries. 8)Specifies that if an employee receives different hourly rates in the pay period when the accrued paid sick leave is taken, then the rate of pay shall be calculated in the same manner as the regular rate of pay for purposes of overtime. 9)Makes other related changes. AB 304 Page 3 EXISTING LAW provides that an employee who, on or after July 1, 2015, works in California for 30 or more days is entitled to paid sick days for specified purposes, to be accrued at a rate of not less than one hour for every 30 hours worked. FISCAL EFFECT: Unknown COMMENTS: AB 1522 (Gonzalez) of 2014 enacted the Health Workplaces, Healthy Families Act of 2014 to provide paid sick days to specified California employees effective July 1, 2015. AB 1522 was landmark legislation that extended the right to paid sick days to an estimated 6.5 million California workers. This bill makes a number of changes to the legislation passed last year, most of which can be characterized as clarifying or clean-up in nature, and several of which have been negotiated with representatives of employers or various industries. Key Provision of Existing Law at Issue in This Bill One proposed change contained in this bill has generated significant controversy. As passed last year, the law enacted Labor Code Section 246 (d) which reads as follows: (d) Accrued paid sick days shall carry over to the following year of employment. However, an employer may limit an employee's use of paid sick days to 24 hours or three days in each year of employment. This section shall be satisfied and no accrual or carry over is required if the full amount of AB 304 Page 4 leave is received at the beginning of each year, in accordance with subdivision (e). In addition, Labor Code Section 246 (e) reads as follows: (e) An employer is not required to provide additional paid sick days pursuant to this section if the employer has a paid leave policy or paid time off policy, the employer makes available an amount of leave that may be used for the same purposes and under the same conditions as specified in this section, and the policy does either of the following: (1) Satisfies the accrual, carry over, and use requirements of this section. (2) Provides no less than 24 hours or three days of paid sick leave, or equivalent paid leave or paid time off, for employee use for each year of employment or calendar year or 12-month basis. Differences of Interpretation and the Change Proposed in This Bill The language cited above appears to have become the subject of much debate among the stakeholders involved in the original discussions around AB 1522. On the one hand, the author and supporters of AB 1522 contend that the language in Section 246(e)(2) above requires the leave to be provided at the beginning of the year, and allege that this is how the language has been interpreted by the Labor Commissioner. Any other interpretation, they contend, would AB 304 Page 5 allow an employer to wait to provide the leave until the last three days of the year, which was clearly not the intention of AB 1522. Moreover, they point to the language in Section 246(e) that states such leave must be provided "under the same conditions" to prohibit employers from ignoring the other conditions outlined in the bill (including the accrual rate). The California Chamber of Commerce, on the other hand, argues that the aforementioned language in Section 246(e)(2) was a specifically-negotiated compromise to allow for employers who otherwise provide for paid sick leave, but do so under a different accrual method (such as by pay period) that therefore would not satisfy the accrual requirements of AB 1522. They deny that this language was intended to require such leave to be provided "up-front" at the beginning of the year, and deny that the Labor Commissioner has interpreted the requirement in this manner. This bill proposes to amend Section 246(e) to read as follows: (e) An employer is not required to provide additional paid sick days pursuant to this section if the employer has a paid leave policy or paid time off policy, the employer makes available an amount of leave that may be used for the same purposes and under the same conditions as specified in this section, and the policy does either of the following: (1) Satisfies the accrual, carry over, and use requirements of this section. AB 304 Page 6 (2) Provides no less than 24 hours or three days of paid sick leave, or equivalent paid leave or paid time off, for employee use at the beginning of each year of employment, calendar year, or 12-month period. ARGUMENTS IN SUPPORT According to the author, this bill aims to improve and ease implementation of California's new paid sick leave law. Last year, AB 1522 was signed into law by Governor Jerry Brown - giving more than 6.5 million workers the right to accrue no less than three paid sick days a year. However, the passage of such a sweeping workplace benefit has spurred a robust public discussion regarding the implementation of the law. As such, the author wishes to clarify a handful of the law's requirements before the law goes into effect on July 1, 2015. ARGUMENTS IN OPPOSITION A coalition of employers, including the California Chamber of Commerce, state that while this bill purports to be a "clean-up" bill, it in fact substantively amends the law to eliminate the opportunity for an employer to provide a more beneficial, accrual based paid sick leave or paid time off policy to their employees. Specifically, they state the following: "Section (2) of 246(e) currently allows an employer to have a written paid sick leave or paid time off policy wherein the employee accrues no fewer than three days or 24 hours in a year, by a method other than hours worked. Interpreting this AB 304 Page 7 section otherwise would essentially render Section (1) of 246(e) meaningless. Section 246 would not provide two options for an employer policy if the intent and requirement were that any employer policy had to match the specific accrual method set forth in AB 1522 of one hour for every 30 hours worked. Moreover, Section 246(e)(2) is not currently limited to "front loading" policies, as such policies are separately recognized in the bill under Section 246(d). As set forth in Section 246(d), an employer does not have to accrue or carry over sick leave if the employer provides three days or 24 hours of paid sick leave at the beginning of each year in accordance with an employer policy. Section 246(d) references subdivision (e) to acknowledge that an employer must have a policy for front loading, not to limit Section 246(e)(2) to only a front loading policy. Nothing in Section 246(e)(2) requires that an employer provide the three days or 24 hours at the beginning of the year - it just requires that an employer provides an employee with three days or 24 hours of paid time off or paid leave within each year. If the Legislature intended Section 246(e)(2) to only apply to front loading policies, it would have explicitly stated so as it did in Section 246(d). [This bill] amends Section 246(e)(2) to completely eliminate an employer's ability to have a paid time off or paid leave policy that accrues paid sick leave in a different manner than hours worked. The amendments limit an employer's policy to only a front loading policy, as referenced in section (d), or a policy that accrues based upon hours worked. As recognized by the current language if Section 246(e)(2) in AB 1522, many employers in California already offer more generous paid time off or paid sick leave to their employees. However, most employers allow employees to accrue this time off according to pay period rather than hours worked as it is easier to track and administer. For example, an employer who AB 304 Page 8 provides 5 days of paid time off a year would simply break down 40 hours over each biweekly pay period for accrual purposes, which would be equivalent to 1.54 hours of accrued time off each per pay period. This type of policy, which is more beneficial to an employee, would be deemed non-compliant by [this bill]. Finally, there is no basis that the Labor Commissioner has mandated such an interpretation of Section 246(e)(2). As just recently provided in the Labor Commissioner's webinar and power point presentation regarding AB 1522, a paid time off policy that provides no fewer than three days or 24 hours of usage for the same purposes as outlined in AB 1522 will be compliant. The Labor Commissioner does not specify that leave must be provided at the beginning of the year in order to be compliant, as [this bill] requires." REGISTERED SUPPORT / OPPOSITION: Support California Railroad Industry Opposition African-American Farmers of California Agricultural Council of California AB 304 Page 9 Air Conditioning Trade Association California Association for Health Services at Home California Association of Bed & Breakfast Inns California Bankers Association California Business Properties Association California Chamber of Commerce California Citrus Mutual California Farm Bureau Federation California Fresh Fruit Association California Hotel and Lodging Association California League of Food Processors California Manufacturers and Technology Association California Restaurant Association AB 304 Page 10 California Retailers Association California Travel Association Family Business Association Far West Equipment Dealers Association National Federation of Independent Business National Hmong American Farmers Nisei Farmers League Plumbing-Heating-Cooling Contractors Association of California Western Electrical Contractors Association Western Growers Association Western Plant Health Association Analysis Prepared by:Ben Ebbink / L. & E. / (916) 319-2091 AB 304 Page 11