Employment Law Alert: New Chicago Law Requires Employers to Provide Both Paid Leave and Paid Sick/Safe Leave by January 1, 2024

As an update to our recent webinar Changes California Employers Need to Make by January 1, 2024, we’re providing this important update for employers with any employees (including remote) that work in the City of Chicago, Illinois. The Chicago City Council recently enacted a new ordinance that requires employers to provide employees who work in Chicago (at least 2 hours within a 2-week period) with both paid leave that can be used for any purpose, and additional paid sick and safe leave. The law specifically requires employers to issue written policies explaining the accrual rates for such leave, to provide written notice of the policies to new hires upon commencement of employment, and notice within five calendar days before changes take effect (14 days for policy changes that affect final pay for unused paid time off). The ordinance takes effect December 31, 2023, and employers must provide compliant paid leave and sick/safe leave by January 1, 2024.

In addition to this detailed article, we've also added discussion of these topics to the on-demand recording of our original webinar: Changes California Employers Need to Make by January 1, 2024 (covered on slides 30 and 38).

Chicago Paid Leave

Similar to the separate but also recently enacted Illinois Paid Leave for All Workers Act (an Illinois state law that will take effect January 1, 2024), the new Chicago law requires employers to provide eligible employees with 40 hours of paid leave per year that the employee can use for any purpose. Because the Chicago law takes effect on December 31, 2023, one day before the Illinois state law, eligible employees receive Chicago paid leave instead of Illinois paid leave (based upon the technical wording of the Illinois state law).

The Chicago law permits employers to require employees (by policy) to provide reasonable notice of using their paid leave, not to exceed 7 days. The law prohibits employers from requiring employees to provide: (a) a reason for their paid leave; or, (b) documentation or certification of their need to take paid leave.

Chicago paid leave may be accrued at the rate of 1 hour of paid leave per 35 hours of work, or frontloaded on the first day of employment or the 12-month accrual period. Carryover of up to 16 hours of unused paid leave is required to the next 12-month period (except this requirement does not apply if the employer provides the full frontloaded 40 hours of paid leave).

Paid leave must be paid at the same rate employees regularly earn during hours worked. For non-exempt employees, Chicago law requires this rate to be calculated by dividing the employee’s total wages (not including overtime, premium pay, gratuities, or commissions) by total hours worked in the full pay periods of the prior 90 days of employment.

Chicago law requires employers with 51 or more employees to pay out separating employees their unused paid leave. The same payout requirement also applies when a geographic transfer causes the employee to no longer be eligible for paid leave under the Chicago ordinance. As a temporary caveat, employers with 51-100 employees may specify in their written policies that payout of paid leave upon separation/transfer is limited to 16 hours through December 31, 2024.

Unlimited Policies: As to employers using unlimited policies to satisfy Chicago paid leave requirements, the Chicago law specifically requires payout upon separation (or transfer outside of Chicago) of at least 40 hours minus the paid leave used by the employee during the preceding 12 months. As discussed in our October 10, 2023 Employment Law Alert: “Unlimited Vacation” Legal Landscape Continues to Evolve”, however, the State of Illinois has taken the position that an employer must pay a separating employee who was covered by an unlimited plan the amount of vacation/PTO that the employee “would otherwise have been allowed to take during that year” but did not take. As by far most employers with unlimited plans would be expected to provide more than 40 hours of vacation or PTO in a year, the State of Illinois’ position generally would be expected to produce a higher potential payout figure. The Chicago law also provides that an employer may not require an employee to obtain employer preapproval before using unlimited paid time during their employment.

Chicago Sick & Safe Leave

The new Chicago law also requires employers to provide Chicago employees with 40 hours of paid sick and safe leave per year (which also may be accrued at the rate of 1 hour per 35 hours of work). Up to 80 hours of unused sick/safe leave must carry over to the next 12-month period. There is no carryover exception for frontloaded sick and safe leave (unlike Chicago paid leave).

Importantly, the 80-hour annual carryover requirement should not be confused with California’s 80-hour total accrual cap permitted for California employees. As Chicago only allows an employer to cap annual carryover to 80 hours, a Chicago employee’s total sick/safe leave accrual balance could reach as high as 120 hours under the law’s minimum requirements (i.e., if an employee carries over 80 hours to a new year, receives another 40 hours for the new year, and uses none of the time).

Sick/safe leave must be paid at the same wage rate noted above for Chicago paid leave.

Employees may use sick/safe leave for the same reasons listed under prior Chicago law, but it is important for California employers to recognize that these reasons significantly exceed the qualifying uses of sick leave under California law. Appropriate policy adjustments should be made to apply to Chicago employees. Chicago sick/safe leave may be used when:

• the employee is ill or injured, or for the purpose of receiving professional care, including preventive care, diagnosis, or treatment, for medical, mental, or behavioral issues, including substance use disorders;
• the employee's family member is ill, injured, or ordered to quarantine, or to care for a family member receiving professional care, including preventive care, diagnosis, or treatment, for medical, mental, or behavioral issues, including substance use disorders;
• the employee, or employee's family member, is the victim of domestic violence, or a sex offense, or trafficking in persons;
• the employee's place of business is closed by order of a public official due to a public health emergency, or the employee needs to care for a family member whose school, class, or place of care has been closed; or,
• the employee obeys an order issued by the Mayor of Chicago, the Governor of Illinois, the Chicago Department of Public Health, or a treating healthcare provider, requiring the Covered Employee to: (i) stay at home to minimize the transmission of a communicable disease; (ii) remain at home while experiencing symptoms or sick with a communicable disease; or, (iii) obey a quarantine order issued to the Covered Employee.

Updating Policies

Employers with any employee(s) working in Chicago should work with their employment law counsel promptly to update their policies so that they can be issued to Chicago employees on or before December 31, 2023. The complexity of these updates will vary for different employers, depending on the nature of their policies. For example, employers that already provide accrued Paid Time Off (“PTO”) (a single, hybrid benefit that can be used for vacation and/or sick leave) may be able to make relatively minor adjustments to their PTO policies to satisfy both Chicago paid leave and sick/safe leave requirements, if the PTO policy provides enough time in total to cover both requirements.

By contrast, some employers provide employees with separate accrued vacation and sick leave. Most often, employers that provide separate vacation and sick leave do so to prioritize attendance control (because only the sick leave bucket of time, and not vacation, is intended for sudden, unexpected absences). Typical vacation policies would not satisfy the requirements of Chicago paid leave, because they generally require more advance notice, and preserve full discretion by management to approve or deny employee vacation scheduling requests. Employers that provide separate vacation and sick leave may wish to consider options including: (a) switching to an accrued PTO policy for Chicago employees; or, (b) providing reduced (e.g., by 40 hours per year) accrued vacation to Chicago employees, along with the minimum required Chicago paid leave and sick and safe leave.

Reliance on an unlimited policy to satisfy the Chicago law’s requirements has obvious downsides, including that the law prohibits an employer from requiring the employee to obtain pre-approval before using unlimited time. Separation payout requirements under Illinois and Chicago laws further complicate the use of unlimited policies in those jurisdictions. Employers with these policies may wish to consider alternatives including: (a) switching to an accrued PTO policy with terms that would satisfy Chicago paid leave and sick and safe leave requirements; or, (b) providing unlimited vacation, and separately, the minimum required Chicago paid leave and sick and safe leave (either accrued or frontloaded).

Conclusion

The new Chicago law puts employers with any Chicago employees in a time crunch to update their policies on or before December 31, 2023. In addition to working with legal counsel to make necessary policy updates, employers should also consult with their legal counsel regarding additional requirements for the Chicago law that are beyond the scope of this alert (e.g., notice, posting, and record keeping requirements).

Employers seeking further guidance may contact any of the firm’s attorneys.