BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
                             Senator Tony Mendoza, Chair
                                2015 - 2016  Regular 

          Bill No:               AB 304       Hearing Date:    July 8,  
          2015
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          |Author:    |Gonzalez                                             |
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          |Version:   |June 22, 2015                                        |
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          |Urgency:   |Yes                    |Fiscal:    |Yes              |
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          |Consultant:|Alma Perez-Schwab                                    |
          |           |                                                     |
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                   Subject:  Sick leave: accrual and limitations.


          KEY ISSUE
          
          Should the Legislature amend the paid sick leave law enacted  
          last year, which requires employers to provide specified  
          employees with up to three days per year of leave, in order to  
          address some stakeholder concerns and ensure proper  
          implementation? 


          ANALYSIS
          
           Under the existing Healthy Workplaces, Healthy Families Act of  
          2014  , starting on July 1, 2015, an employee who works in  
          California for 30 or more days within a year from the  
          commencement of employment is entitled to paid sick days at the  
          rate of not less than one hour per every 30 hours worked.  

          Among other things, the Act (Labor Code 245-249):

             1.   Authorizes the use of accrued paid sick days beginning  
               on the 90th day of employment. 
             2.   Allows employers to limit the use of paid sick days to  
               24 hours or three days per year. 
             3.   Upon the oral or written request of an employee,  
               requires an employer to provide paid sick days for:
                  a.        Diagnosis, care, or treatment of an existing  
                    health condition of, or preventive care for, the  







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                    employee or the employee's family member (defined as a  
                    child, parent, spouse, registered domestic partner,  
                    grandparent, grandchild and sibling). 
                  b.        For specified purposes, as defined, for an  
                    employee who is a victim of domestic violence, sexual  
                    assault, or stalking. 
             4.   Prohibits an employer from denying an employee the right  
               to use accrued sick days, discharge, threaten to discharge,  
               demote, suspend, or in any manner discriminate against an  
               employee for using accrued sick days, attempting to  
               exercise the right to use accrued sick days, filing a  
               complaint with the department or alleging a violation of  
               this article, cooperating in an investigation or  
               prosecution of an alleged violation of this article, or  
               opposing any policy or practice or act that is prohibited  
               by this article.
           

          This Bill  would make a number of changes to the Healthy  
          Workplaces, Healthy Families Act enacted last year.  
          Specifically, this bill:   
               
             1)   Provides that the definition of "employee" does not  
               include specified retired annuitants.

             2)   Specifies that an "employee in the construction  
               industry" means an employee performing work - deleting the  
               reference to "onsite work" in the current provisions of the  
               law. 

             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)   Provides that an employer may use a different accrual  
               method, other than providing one hour per every 30 hours  
               worked, provided that the accrual is on a regular basis so  
               that an employee has no less than 24 hours of accrued sick  
               leave or paid time off by the 120th calendar day of  
               employment or each calendar year, or in each 12-month  
               period.

             5)   Provides that an employer may satisfy the accrual  
               requirements of this section by providing not less than 24  








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               hours or three days of paid sick leave that is available to  
               the employee to use by the completion of his or her 120th  
               calendar day of employment.

             6)   Amends the law to specify 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 (beginning July 1, 2015) an  
               amount of leave that may be used for the same purposes and  
               under the same conditions, and the policy satisfies one of  
               the following options:

               a)     Satisfies the accrual, carry over, and use  
                 requirements of the law.

               b)     Provided paid sick leave or paid time off to a class  
                 of employees before January 1, 2015, pursuant to a sick  
                 leave policy that used an accrual method different than  
                 providing one hour per every 30 hours worked, provided  
                 that the accrual is on a regular basis so that an  
                 employee, including an employee hired into that class  
                 after January 1, 2015, has no less than one day or eight  
                 hours of accrued leave within three months, and the  
                 employee was eligible to earn at least three days or 24  
                 hours within nine months.  If an employer modifies the  
                 accrual method used in the policy it had in place prior  
                 to January 1, 2015, the employer shall comply with any  
                 accrual method set forth in existing law or provide the  
                 full amount of leave at the beginning of the year.  This  
                 bill shall not prohibit the employer from increasing the  
                 accrual amount or rate.

               c)     Provides that specified sick leave or annual leave  
                 benefits provided to specified state employees or  
                 officers by statute or the provisions of a memorandum of  
                 understanding meet the requirements of the paid sick  
                 day's law.

             7)   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.

             8)   Provides that if an employer provides unlimited paid  








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               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."

             9)   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.

             10)  Provides that an employer shall calculate paid sick  
               leave using any of the following calculations: 

               a)     Paid sick time for nonexempt employees shall be  
                 calculated in the same manner as the regular rate of pay  
                 for the workweek in which the employee uses paid sick  
                 time, whether or not the employee actually works overtime  
                 in that workweek.  

               b)     Paid sick time for nonexempt employees shall be  
                 calculated by dividing the employee's total wages, not  
                 including overtime premium pay, by the employee's total  
                 hours worked in the full pay periods of the prior 90 days  
                 of employment. 

               c)     Paid sick time for exempt employees shall be  
                 calculated in the same manner as the employer calculates  
                 wages for other forms of paid leave time.

             11)  Provides that an employer is not obligated to inquire  
               into or record the purpose for which an employee uses paid  
               leave or paid time off.

             12)  Provides that the provisions of this bill are severable,  
               as specified.

             13)  Contains an urgency clause.



          COMMENTS
          
          1.  Need for this bill?








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            AB 1522 (Gonzalez), Chapter 317, Statutes 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. 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 in order  
            to ease implementation of California's new paid sick leave  
            law.  

            This bill would amend the Act in order to provide  
            clarification regarding which workers are covered, how the  
            paid time off is accrued, and protections for employers that  
            already provide paid sick leave. Previous versions of the bill  
            were opposed by various employer organizations, however, the  
            author and stakeholders were able to reach agreement on the  
            language before us which has addressed most of the employer  
            concerns.  In a letter dated June 19, 2015, the California  
            Chamber of Commerce and a coalition of employer organizations  
            removed their opposition to the bill. 

          2.  Summary of changes to the Healthy Workplaces, Healthy Families  
            Act of 2014: 

            Below is a summary of the changes to the paid sick law that  
            are proposed with this bill:  
           
             Conforms to State Law Governing CalPERS Retired Annuitants:  
            Under the Government Code, CalPERS retired annuitants are not  
            allowed to receive any form of compensation in addition to  
            their pay as it could affect their status under CalPERS. By  
            exempting retired annuitants from the provisions of AB 1522,  
            retired persons will be able to return to work while still  
            receiving their pension annuity.
             
             Flexibility for Existing Paid Sick Leave Plans: Prior to the  
            signing of AB 1522, some employers were already engaged in the  
            practice of providing paid leave or paid time off. This bill  
            will clarify that employers are not required to provide  
            additional paid sick days if the employer had a policy prior  
            to January 1, 2015 that meets certain conditions, as  








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            specified.

            Alternative Accrual for Non-Hourly Payroll: The payroll  
            systems for many employers do not track their employees on an  
            hourly basis. This bill will allow employers to comply with  
            state law if they accrue or front-load their sick leave  
            policies so employees receive three paid sick days by the  
            120th day of the year.

            Labor-Management Consensus in Specific Industries: The motion  
            picture and broadcasting industry commonly uses different  
            third party payroll companies on each production. This bill  
            will extend the start date for written notice requirements to  
            January 21, 2016 as agreed to by both employer and labor  
            representatives in the industry. 

            Flexibility for Calculating Sick Pay: Nonexempt employees  
            often perform work at varying rates of pay, which can make it  
            difficult to calculate the rates at which sick leave is paid  
            to employees. This bill will allow employers to choose between  
            the methodology required under AB 1522 as well as the "regular  
            rate of pay" that is more familiar to many employers.

          3.  Remaining Concerns: 

            Committee staff has received information regarding some  
            unresolved concerns with the provisions of the paid sick days  
            law and its implementation.  Specifically, stakeholders are  
            seeking clarification in the following areas: 

            Calculating Paid Sick Leave for Employees Working on  
            Commission: Concerns have been raised regarding the  
            calculation of wages to be paid for an employee working on  
            commission that takes their accrued paid sick days.  

            The bill provides that an employer shall calculate paid sick  
            leave using any of the following:
               a)     For nonexempt employees:
                  i)        In the same manner as the regular rate of pay  
                    for the workweek in which the employee uses paid sick  
                    time, whether or not he/she works overtime in that  
                    week.
                  ii)       By dividing the employee's total wages, not  
                    including overtime premium pay, by the employee's  








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                    total hours worked in the full pay periods of the  
                    prior 90 days. 
               b)     Paid sick time for exempt employees (exempt as an  
                 administrative, executive, or professional employee under  
                 a wage order of the Industrial Welfare Commission)  shall  
                 be calculated in the same manner as the employer  
                 calculates wages for other forms of paid leave time.

            The concern is that an outside sales person that essentially  
            sets their own hours and is highly compensated could 'game'  
            the system by planning when to request the paid sick days in  
            order to get a higher rate by timing the receipt of their  
            income.  Staff was given the example of property and casualty  
            insurance agents and brokers who are paid on commission and  
            have both renewal income as well as income based on new sales  
            closed during the year. As an example, they offer the  
            following scenario: an employee that earns $300,000 annually  
            but takes a smaller monthly draw, say $8,000 per month, but  
            toward the end of the year draws down the remainder of the  
            income owed would be able to game the system because the  
            balloon payments toward the end of the year will allow that  
            person (for the next 90 days) to request sick pay at a much  
            higher rate than if the sick pay was determined based on the  
            income paid over the entire 12 months. 

            This is a similar concern for employees who earn bonuses.  
            Stakeholders would like the provisions to align to last year's  
            regular rate of pay concept which stated, "If the employee in  
            the 90 days of employment before taking accrued sick leave had  
            different hourly pay rates, was paid by commission or piece  
            rate, or was a nonexempt salaried employee, then the rate of  
            pay shall be calculated by dividing the employee's total  
            wages, not including overtime premium pay, by the employee's  
            total hours worked in the full pay periods of the prior 90  
            days of employment." 

            Continuous 90-day employment: Concerns have been raised by the  
            City and County of San Francisco regarding an individual that  
            works for an employer for part of the year, leaves that job  
            and later in the year returns to work for the same employer.   
            The concern lies in the ability of that employee to regain  
            access to any balance paid sick days if they had such access  
            at the time of separation.  Specifically, the concern is that  
            an employee might work for 30 days, then return 8 months later  








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            and the employer would have to stitch together the previous  
            employment with the new employment to figure out when 90 days  
            of employment is cumulatively met.  They propose the following  
            clarification:  "246. (f)(2) If an employee separates from an  
            employer  90 or more days after he or she was hired  and is  
            rehired by the employer within one year from the date of  
            separation, previously accrued and unused paid sick days shall  
            be reinstated?" They believe that this revision would allow  
            the employee access to the balance but if the employee did not  
            have access when he/she left, the clock would restart if  
            rehired like any other new hire. 

          4.  Proponent Arguments  :
            
            According to the author, in order to help employers meet  
            requirements, clarify provisions and ensure the smooth  
            implementation of the Healthy Workplaces, Healthy Families Act  
            of 2014, this bill aims to conform state law governing CalPERS  
            retired annuitants, provide flexibility for existing paid sick  
            leave plans, allow for alternative accrual for non-hourly  
            payroll, provide for labor-management consensus in specific  
            industries, allow for flexibility in calculating sick pay for  
            nonexempt employees and make a number of minor changes that  
            are clarifying and technical in nature.  Proponents state that  
            this bill makes important changes to the sick leave law so  
            that its provisions work better for employers and workers and  
            facilitate an orderly implementation.  

          5.  Opponent Arguments  :

            None received. 



          6.  Prior Legislation  :

            AB 11 (Gonzalez) of 2015:  Held in Assembly Appropriations  
            Committee
            AB 11, effective July 1, 2016, would extend the provisions of  
            paid sick days legislation enacted last year to include  
            providers of in-home supportive services, as described. 

            AB 1522 (Gonzalez) of 2014: Chaptered 
            AB 1522 enacted the Healthy Workplaces, Healthy Families Act  








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            of 2014 (discussed above)  which requires employers to provide  
            paid sick days to employees who work 30 or more days within a  
            year from commencement of employment.  



          SUPPORT
          
          Air Conditioning Sheet Metal Association
          Air-Conditioning & Refrigeration Contractors Association
          Brocade Communications Systems, Inc. 
          California Chapters of the National Electrical Contractors  
          Association
          California Employment Law Council 
          California Legislative Conference of the Plumbing, Heating and  
          Piping Industry
          California State Association of Counties
          Finishing Contractors Association of Southern California 
          League of California Cities
          Motion Picture Association of America
          State Building and Construction Trades Council
          United Contractors
          Wall and Ceiling Alliance
          Wine Institute 
          

          OPPOSITION
          
          None received 


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