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As we have previously reported (here and here), the Illinois Paid Leave for All Workers Act (“Illinois Paid Leave Act”) goes into effect on January 1, 2024, and allows eligible Illinois employees to earn up to 40 hours of paid leave each year, which employees may use for any reason. However, the Illinois Paid Leave Act does not apply to employees who are already covered by a county or municipal ordinance in effect on January 1, 2024 --  e.g., the current Chicago Paid Sick and Safe Leave ordinance (“PSL Ordinance”). In an apparent effort to outshine the Illinois legislature, on November 9, 2023, the City of Chicago passed its Chicago Paid Leave and Paid Sick and Safe Leave Ordinance (“Ordinance”) (available here), which goes into effect on December 31, 2023, and replaces the City’s current PSL Ordinance. Significantly, the new Ordinance applies to virtually all employers and entitles “covered employees” (i.e., most employees working in Chicago) to earn up to a total of 80 hours of paid leave each year, which will be divided into two categories: 40 hours of “Paid Leave” (i.e., leave available for any reason) and 40 hours of “Paid Sick Leave” (i.e., leave available for specified sick and safety reasons).

The new Ordinance differs significantly from the City’s current PSL Ordinance – not only because it entitles employees to earn twice as much paid time off per year, but also because of its generous provisions related to employee eligibility, accrual rates, carryover allowances, and (if you are an employer with 51 or more employees in Chicago), payout of certain amounts of accrued, unused Paid Leave upon an employee’s separation of employment. We anticipated the City would modify its current PSL Ordinance in response to the Illinois Paid Leave Act; however, the extent of those modifications surely come as a surprise to many employers already struggling to draft new or modified policies to comply with the Illinois Paid Leave Act’s nuances.

Covered Employers and Employees

The new Ordinance applies to all employers who have a covered employee working in Chicago, regardless of the employer’s size, number of employees, or primary location. The new Ordinance broadly defines a “covered employee” as an employee who, in any particular two-week period, performs at least two hours of work for an employer while physically present within the geographic boundaries of the City of Chicago – thus significantly expanding the scope of employees eligible for paid time off. Any compensated time an employee spends within Chicago’s geographic boundaries – including business travel, deliveries, and sales calls – counts towards those “hours worked” (although the Ordinance confirms an employee’s uncompensated commuting time in Chicago does not count).

The Ordinance applies to most individuals working in Chicago (including “Domestic Workers”), with some narrow exceptions that include:

• independent contractors (unless the independent contractor is a domestic worker as defined by the Ordinance, in which case the Ordinance applies to that domestic worker);
• employees who work for governmental agencies other than the City and its “Sister Agencies” (the Ordinance applies to City employees);
• employees working in the construction industry who are covered by a bona fide collective bargaining agreement; and
• employees covered by other collective bargaining agreements in effect on January 1, 2024. After January 1, 2024, parties to a collective bargaining agreement may agree to waive the Ordinance’s requirements, but only if the waiver is set forth explicitly in the agreement in clear and unambiguous terms. 

Amount of Leave, Accrual Rates, and Carryover Rules

Put simply, as of January 1, 2024, most employees working in the City of Chicago are entitled to earn or accrue up to 80 hours of paid time off each year, and the Ordinance outlines several ways employers can satisfy this requirement. Critically, the Ordinance does not include any maximum caps on how many hours of Paid Leave or Paid Sick Leave an employee may use during a 12-month period. Thus, employers will want to carefully consider the pros and cons associated with using one or more of the options below, including the carryover rules associated with each option.

Accrual Method and Carryover Obligations: Starting January 1, 2024, or on the first day employment (whichever is later), covered employees will accrue one hour of Paid Leave AND one hour of Paid Sick Leave for every 35 hours worked, up to a maximum of 40 hours of Paid Leave and 40 hours of Paid Sick Leave per 12-month period – i.e., accrual of up to 80 hours of paid time off per year. Employees who are exempt from overtime under applicable law will be assumed to work 40 hours in each work week (unless an employee’s normal work week is less than 40 hours, in which case the employee will accrue paid time off based on the employee’s normal work week schedule). The Ordinance specifies that paid time off must accrue in hourly increments and not fractional accruals; although there is an exception to this rule that allows for monthly accrual if an employer provides employees more hours of paid leave than what is required under the Ordinance. The Ordinance also specifies that the year or “12-month period” for a covered employee must be calculated from the date the employee begins to accrue paid time off under the Ordinance.

Employers that use the accrual method described above must allow employees to carry over up to 16 hours of accrued, unused Paid Leave from one year to the next and up to 80 hours of accrued, unused Paid Sick Leave from one year to the next.

Front-loading Method and Carryover Obligations: Alternatively, employers can elect to “frontload” 40 hours of Paid Leave and 40 hours of Paid Sick Leave to employees at the beginning of each 12-month period (e.g., on January 1, 2024, for employees working in Chicago at that time). If an employer decides to frontload the full 40 hours of Paid Leave to employees at the beginning of a benefit year, employees are not entitled to carry over Paid Leave from one year to the next and, instead, an employer may require employees to use all Paid Leave within the 12-month period or forfeit any unused portion. Significantly, however, even if an employer frontloads 40 hours of Paid Sick Leave to employees at the beginning of a 12-month period, the employer still must permit employees to carry over up to 80 hours of Paid Sick Leave to the next benefit year.

Unlimited Paid Time Off Policies and Carryover Obligations: As another alternative, the Ordinance specifies that employers may choose to grant employees “unlimited paid time off” on the first day of their employment or on the first day of a benefit year, so long as such unlimited hours of paid time may be used “for any reason.” Employers who use this method are not required to carry over an employee’s unused paid time off to the next benefit year, regardless of whether the paid time off is considered Paid Leave or Paid Sick Leave. However, there are significant risks employers should consider before opting for this approach and, as noted below, this option does not relieve an employer’s obligation to potentially pay out a certain amount of “leave” to employees upon separation of employment.

Authorized Uses, Certification, and Applicable Waiting Periods

As noted above, the Ordinance distinguishes between Paid Leave and Paid Sick Leave.

            Paid Leave

With respect to Paid Leave, the Ordinance echoes the Illinois Paid Leave Act in many ways, and, like that Act, provides the following: (i) employees may use Paid Leave for any reason; (ii) employers may not require employees to provide a reason for using Paid Leave; and (iii) employers may not require employees to provide any documentation or certification in support of Paid Leave. Employers must allow employees to begin using accrued Paid Leave no later than the 90th day following their hire date.

            Paid Sick Leave

With respect to Paid Sick Leave, covered employees may use Paid Sick Leave for any of the following reasons:

• if ill or injured, or for the purpose of receiving professional care, including preventive care, diagnosis, or treatment, or medical, mental, or behavioral issues, including substance use disorders;
• if a family member is ill or 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 abuse disorders;
• the employee, or a member of the employee’s family, is the victim of domestic violence, a sex offense, or trafficking;
• the employer is closed by order of a public health official due to a public health emergency, or the employee needs to care for a child whose school, class, or place or care has been closed; and/or
• the employee obeys an order issued by the Mayor, the Governor of Illinois, the Chicago Department of Public Health, or a treating healthcare provider requiring the 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; (iii) obey a quarantine order issued to the employee; or (iv) obey an isolation order issued to the employee.

Employers must allow employees to begin using accrued Paid Sick Leave no later than the 30th calendar day following their hire date. In contrast to the provisions regarding Paid Leave, and consistent with the City’s current PSL Ordinance, employers may require employees to provide certain documentation or certification confirming that an employee’s use of Paid Sick Leave was related to one of the authorized reasons listed above, but only if an employee is absent for more than three consecutive work days. Employers may discipline employees who use Paid Sick Leave for non-authorized reasons.

Increments of Use

For employees using Paid Leave, employers cannot set a minimum increment for use that exceeds four hours. For employees using Paid Sick Leave, employers cannot set a minimum increment for use that exceeds two hours. 

Timing of Pay and Rate

Once an employee uses any leave time available under the Ordinance, the employer must pay the employee no later than the payday for the next regular payroll period after the paid time off was taken. Paid Leave and Paid Sick Leave must be compensated at the same rate and with the same benefits (including health care benefits) that the employee regularly earns during hours worked. Employers must notify an employee if the employee is responsible for paying the employee’s share of any health care coverage costs during the employee’s leave.

Employee Notice Requirements

Where the need for Paid Leave or Paid Sick Leave is foreseeable (e.g., prescheduled appointments and court dates), employers may require employees to provide seven days’ advance notice to the employer. For Paid Leave (as opposed to Paid Sick Leave), the employer also may require employees to obtain reasonable “preapproval” for foreseeable leave, so long as any preapproval requirements are designed to ensure continuity of the employer’s operations and consistent with rules that will be issued by the City’s Office of Labor Standards. Employers may not require employees whose paid time off under the Ordinance is addressed through an Unlimited Paid Time Off Policy to obtain such preapproval before taking paid time off. 

In cases where the need for Paid Sick Leave is not foreseeable, employers may require employees to provide notice “as soon as practicable.”

Provisions Regarding Pay Out of Unused Leave Upon Termination, Transfer, and Other Situations

Employers are not required to pay employees for any accrued, unused Paid Sick Leave upon separation of employment or the employee’s transfer to a location outside of Chicago. However, unlike most mandatory paid sick leave laws and similar paid leave laws throughout the United States, the new Ordinance requires payout of accrued, unused Paid Leave upon separation of an employee’s employment in certain circumstances, depending in part on the number of employees the employer has working in Chicago and the method the employer uses to comply with the Ordinance’s requirements:

• Employers with 50 or fewer employees working in Chicago (i.e., “Small Employers”) are not required to pay employees for any accrued, unused Paid Leave upon separation of employment or the employee’s transfer to a location outside of Chicago.
• Employers with 51 to 100 employees in Chicago (i.e., “Medium Employers”) are required to pay employees up to 16 hours of any accrued, unused Paid Leave upon separation of employment or the employee’s transfer to a location outside of Chicago if such separation or transfer occurs on or before December 31, 2024. However, beginning January 1, 2025, Medium Employers will be required to pay employees for all accrued, unused Paid Leave upon separation of employment or the employee’s transfer to a location outside of Chicago.
• Employees with more than 100 employees in Chicago are required to pay employees for all accrued, unused Paid Leave upon separation of employment or the employee’s transfer to a location outside of Chicago, without any grace period during the first year.
• For employers who satisfy the Ordinance’s requirements through an “Unlimited Paid Time Off” policy, the employer must pay employees who are separating employment or transferring to a location outside of Chicago the monetary equivalent of 40 hours of paid time minus the hours of paid time off the employee used during the 12-month period before the date of separation. 

In addition to the above requirements, the Ordinance includes the following provisions related to end of employment, transfer, and reinstatement:

• An employee may request payout of their unused Paid Leave if they have not received a work assignment for 60 days. In addition, if an employer has not offered an employee a work assignment for 60 days, the employer must notify the employee in writing that the employee may request payout of their accrued, unused Paid Leave.
• If an employee is transferred to a separate division, entity, or location, but remains employed by the same employer, the employee may continue to use all accrued, unused Paid Leave and Paid Sick Leave accrued, as provided in the Ordinance.
• Except as included in a collective bargaining agreement, no employment contract or employer policy can require covered employees to forfeit their accrued Paid Leave or Paid Sick Leave because they are no longer “covered” by the Ordinance and/or no longer work in the City.

Employer Notice, Written Policy, and Related Requirements

The Ordinance imposes multiple notice, posting, policy, and recordkeeping requirements on employers, including the following:

• Written Policy: Employers must provide employees with a written policy that explains the employer’s paid time off policy, including how employees accrue (or earn) paid time off for purposes of the Ordinance and the procedures employees must follow to provide the employer with any required advance notice. The employer’s policy must be provided to employees at the start of their employment, within five days before the employer subsequently changes any policy requirements, and at least 14 days before any policy changes are put in place that would impact an employee’s right to payout of Paid Leave upon separation of employment.
• Notice Required Every Pay Period (Paystub Notice or Other Reasonable Means): Each time wages are paid, employers must provide each employee with updated information regarding the amount of Paid Leave and Paid Sick Leave available to the employee and applicable accrual rates for Paid Leave and Paid Sick Leave. The updated amount of Paid Leave and Paid Sick Leave should include the amount of paid time off hours the employee gained or used during the previous pay period and the amount of any unused paid time off that remains available for use. Employers may choose a reasonable system for providing this notification, including, but not limited to, listing available paid time off on each pay stub or developing an online system where employees can access their own Paid Leave or Paid Sick Leave information.
• Notice Posting: By December 31, 2023, employers must post a required notice regarding employees’ rights under the Ordinance at each of its Chicago facilities. The City will provide a form notice that satisfies this requirement. If an employer does not have a facility located in Chicago, the employer is exempt from this requirement. If an employer’s workforce includes a significant portion of employees who are not literate in English, the employer should reach out to the City to request notices in other languages.
• Annual Notice Included with Paycheck: Employers must provide employees with notice of the Ordinance’s requirements with the employee’s first paycheck, and annually thereafter with a paycheck issued within 30 days of July 1st of each year. The City will provide a form notice that satisfies this requirement.

In addition to the above notice requirements, the Ordinance requires employers to maintain specific records related to the Ordinance for at least five years or the duration of any claim, civil action, or investigation, whichever is longer. Among other things, the records must include the following for each employee: the number of paid time off hours earned for each year and the dates on which paid time off hours were taken. An employer’s failure to maintain such records will create a presumption that the employer violated the Ordinance, which the employer may rebut with “clear and convincing evidence.” Employers must provide an employee with a copy of records reflecting the employee’s information upon the employee’s request.

Impact on Existing Policies and Potential “Stacking” of Leave

If an employer creates a new policy to comply with the Act (for example, if an employer’s existing policy does not already provide for the full amount of leave required under the new Ordinance), any paid sick leave the employee accrued prior to January 1, 2024, that the employee is eligible to carry over to the next year must be transferred to the employee’s new Paid Sick Leave balance.

If an employer already has a paid time off policy that is consistent with or more generous than the minimum requirements of the Ordinance, the employer is not required to provide additional Paid Leave or Paid Sick Leave. However, if an employer chooses to charge time required under the Ordinance to its paid time off policy, the employer must expressly state in its policy that it is doing so. In addition, employers may need to modify any paid time off policies to comply with other requirements in the Ordinance. 

Significantly, the Ordinance provides that unless “obligated” by a city, state, or federal law, employees may “choose” whether to use Paid Leave or Paid Sick Leave prior to using any other leave the employer provides pursuant to such laws, which raises significant questions about an employee’s ability to use paid time off under the Ordinance to extend the time period for other paid or unpaid absences available to them under applicable laws.

Employer Prohibitions and Potential Penalties and Damages

In addition to the provisions outlined above, employers may not:

• Require an employee taking leave to search for or find a replacement worker to cover the time they will be on leave;
• Retaliate against an employee for exercising rights under the Ordinance; or
• Consider use of paid time off under the Ordinance as a negative factor in any employment action or attendance policy.

Employers who violate the Ordinance are subject to fines between $1,000 and $3,000 for each separate offense; however, violations of the Ordinance’s notice and posting requirements will result in a fine of $500 for the employer’s first violation and $1,000 for any subsequent violations. Employers who violate the Ordinance are liable to any affected employee for damages equal to three times the full amount of any leave denied or lost by reason of the violation (plus interest), as well as costs and reasonable attorney’s fees.

Employees also may bring a private civil action against an employer seeking the same damages as those available above. Employees may bring a civil action for violations related to the Ordinance’s Paid Sick Leave requirements beginning December 31, 2023. In connection with the Ordinance’s Paid Leave requirements, an employee’s right to a private cause of action is not available until January 1, 2025. 

Next Steps

The City intentionally included an effective date of December 31, 2023, to ensure the new Ordinance is not preempted by the new Illinois Paid Leave Act. Consequently, employers will need act very quickly to ensure their paid time off policies and payroll practices comply with the Ordinance’s requirements by the end of this year. We recommend employers begin reviewing their existing policies regarding paid sick leave, vacation, and/or paid time off and consult with their employment counsel as soon as possible to meet this compliance deadline.