Client Alert

California Legislature Mandates COVID-19 Sick Leave
Benefits by Large Employers

Beginning September 19, 2020, private employers in California with 500 or more employees must provide supplemental paid sick leave benefits to all full-time and part-time employees in certain COVID-19 related circumstances.  The COVID-19 supplemental paid sick leave required under AB 1867 is similar to that required under the Families First Coronavirus Response Act (FFCRA).  However, the FFCRA only applies to employers with fewer than 500 employees; large employers are exempt.  AB 1867 overcomes this exemption in California by imposing paid sick leave requirements on large employers. 

However, unlike the FFCRA, AB 1867 does not contain a reimbursement mechanism.  Large employers must provide the newly-mandated supplemental paid leave at their own expense.  In addition, AB 1867 requires that employers provide supplemental paid sick leave benefits in certain circumstances that are not covered by the FFCRA.  Employers should carefully evaluate which of the two statutory schemes apply to their operations, and the specific obligations they must meet.              

Employers Subject to AB 1867

AB 1867 broadly applies to all “Hiring Entities” with 500 or more employees.  The term “Hiring Entity” includes private sole proprietorships, corporations, partnerships, limited liability companies, and any other kind of business enterprise. 

 A Hiring Entity’s number of employees is determined by reference to Section 826.40(a)(1) and (2) of Title 29 of the Code of Federal Regulations, which outlines the process for determining if an employer is subject to the FFCRA.  Practically speaking, if an employer determines it has fewer than 500 employees under the applicable Federal Regulations, it is subject to the paid leave requirements set forth in the FFCRA; if it has 500 or more employees, it is subject to AB 1867.       

To determine if they fall below or above the 500-employee threshold, employers should include in their count all employees maintained on their payroll, all employees on any type of leave (FMLA, sick, PTO, etc.), temporary employees who are jointly employed by one or more employers (regardless of which employer maintains the payroll of these employees), and day laborers supplied by a temporary agency. 

Generally, corporations (including separate establishments or divisions) are deemed separate employers unless they constitute a joint employer under the joint employer standard of the Fair Labor Standards Act with respect to certain employees, in which case each corporation must count the common employees. Separate entities will be considered a single employer if they meet the integrated employer standard under the Family Medical Leave Act. 

Emergency Paid Sick Leave

Under AB 1867, a covered Hiring Entity must provide COVID-19 supplemental paid sick leave to each covered employee (“Covered Worker”) that:

(1) Is employed by the Hiring Entity; and

(2) Leaves his of her home or other place of residence to perform work for the Hiring Entity. 

                A Covered Worker is entitled to COVID-19 supplemental paid sick leave if he or she is:

(A) Subject to a federal, state, or local quarantine or isolation order related to COVID-19;

(B) Advised by a health care provider to self-quarantine or self-isolate due to concerns related to COVID-19; or

(C) Prohibited from working by the Hiring Entity due to health concerns related to the potential transmission of COVID-19.

Employers should take notice of subsection (C) and evaluate how it will affect their operations.  Under the FFCRA and similar local mandates, employers are only obligated to provide supplemental paid sick leave if an employee is subject to quarantine, advised to self-quarantine, experiencing symptoms of COVID-19 and seeking medical diagnosis, or caring for a child whose school or place of care is closed due to COVID-19 precautions.  AB 1867 applies more broadly than the FFCRA.  It requires employers to provide supplemental paid sick leave to employees that are not experiencing symptoms of COVID-19 themselves.  For example, if an employer chooses to close an office location as a precautionary measure (e.g. if an employee or visitor tests positive and the office is closed temporarily), then arguably under subsection (C), above, affected employees that are unable to work remotely may be entitled to receive supplemental paid sick leave during the closure. 

Both part-time and full-time employees are entitled to receive supplemental paid leave up to 80 hours as defined in the statute.  Supplemental paid leave is to be paid at the highest of (a) the covered worker’s regular rate of pay (including pursuant to any applicable collective bargaining agreement); (b) the state minimum wage; or (c) the local minimum wage to which the covered worker is entitled.  However, Hiring Entities are not required to pay more than $511 per day and $5,110 in the aggregate per Covered Worker for COVID-19 supplemental paid sick leave. 

Employers must make COVID-19 supplemental paid sick leave available for immediate use upon the oral or written request of a Covered Worker and may not require that a Covered Worker first use or exhaust any other type of paid or unpaid leave.

Credit for Existing Supplemental Paid Sick Policies and Leave Already Provided

If an employer provides a supplemental benefit (excluding paid sick leave to which a worker is entitled under California Labor Code § 246) that is both payable for the same reasons and in an amount equal to or greater than the compensation AB 1867 requires, the employer may count such supplemental benefit hours toward its obligations under AB 1867.  Similarly, if an employer has already provided supplemental paid leave to a Covered Worker after March 4, 2020, for the reasons described in AB 1867 (e.g. supplemental leave provided pursuant to California Executive Order N-51-20, Labor Code section 248, or a local COVID-19 ordinance), the employer is entitled to credit for the benefit hours already provided so long as the amount paid to the Covered Worker is equal to or greater than the amount required under AB 1867.  Notably, employers may retroactively provide supplemental pay to employees for such hours to qualify for credit against AB 1867 leave requirements.    

Notification Obligations

Employers are required to publish a notice to inform employees of the benefits available to them.  AB 1867 directs the Labor Commissioner to publish a model notice on or before September 26, 2020.  Because many employees have transitioned to remote work arrangements, employers may satisfy the posting requirement by emailing the notice to employees, or otherwise distributing it electronically, such as posting the notice on an employee information internal or external website, if the hiring entity’s employees do not “frequent a workplace.” 

Enforcement by Labor Commissioner

AB 1867 states that the Labor Commissioner shall enforce this section “[i]n addition to other remedies as may be provided by the laws of this state or its subdivisions.”  Though unclear from the face of the statute, it is likely that employees’ counsel will claim that the statute creates a private right of action against an employer, and that a complaint to the Labor Commissioner’s office is not the sole remedy available to aggrieved employees. 

Duration of the Requirement 

AB 1867 becomes effective on September 19, 2020 (ten (10) days after it was signed by the Governor) and remains in effect until December 31, 2020, or until the expiration of any federal extension of the Emergency Paid Sick Leave Act established by the FFCRA, whichever is later.  The Federal Emergency Paid Sick Leave Act is currently set to expire on December 31, 2020 as well.  Given the relatively short effective period of the bill, the legislature may take further action (such as an extension of these paid sick leave benefits) when it reconvenes, particularly if health officials indicate that the effects of the pandemic are expected to continue significantly into 2021.    

Cox Castle has created a Task Force to monitor, analyze and advise on a wide array of business and legal challenges arising from the COVID-19 pandemic, including the matters discussed in this alert.  Coordinating across multiple practice groups and industries, the Task Force is keeping track of the latest developments with COVID-19 and working to provide the best advice possible to our clients in the real estate industry and beyond.  If you have any questions about these matters or responding to the COVID-19 pandemic more generally, please reach out to any Cox Castle professional or member of the Task Force.

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