News

The Chicago Department of Business Affairs and Consumer Protection (“BACP”) recently published its Final Rules interpreting the Chicago Paid Leave and Paid Sick and Safe Leave Ordinance and its Amendment (the “Ordinance”), which takes effect on July 1, 2024. As a reminder, the Ordinance (as we previously reported here and here) applies to most employers who have at least one employee working at least 80 hours in any 120-day period in the City of Chicago. This expansive Ordinance includes the following key provisions:

• Paid Leave Accrual: Employees accrue up to 40 hours of Paid Leave per 12-month benefit period, which employees can use for any reason.
  • Leave accrues at the rate of 1 hour per 35 hours worked in Chicago.
  • As noted below, the Final Rules confirm that if an employer frontloads 40 hours of Paid Leave to employees at the beginning of the benefit year, the employer does not have to allow the employee to carry over those hours to the next benefit year. If the accrual method is used, the employer must allow employees to carry over up to 16 hours of Paid Leave from one benefit year to the next.
• Paid Sick Leave Accrual: Employees accrue up to an additional 40 hours of Paid Sick and Safe Leave (“Paid Sick Leave”) per 12-month benefit period, which employees can use for specified sick and safety reasons.
  • Leave accrues at the rate of 1 hour per 35 hours worked in Chicago.
  • As clarified in the Final Rules, employers must allow employees to carry over up to 80 hours of Paid Sick Leave from one benefit year to the next, even if the employer frontloads the Paid Sick Leave hours to the employee at the beginning of the benefit year.
• No Cap on Use: Significantly, there is no cap on how many hours of accrued Paid Leave and Paid Sick Leave an employee may use during each 12-month benefit period. In light of the Ordinance’s generous carryover provisions, this means employees could accrue enough hours to use up to 56 hours of Paid Leave and up to 120 hours of Paid Sick Leave during a 12-month benefit year after the first year.
• Payment: Employers must pay Paid Leave and Paid Sick Leave at the wage rate an employee “regularly earns during working hours,” and must do so by no later than the payday for the next payroll period after the employee used the Paid Leave or Paid Sick Leave hours.
• Payout at Separation: Depending on an employer’s size, employers may be required to pay out an employee’s accrued Paid Leave (but not the employee’s accrued Paid Sick Leave) upon separation of employment or the employee’s transfer to a non-Chicago location. “Small Employers” – defined as those with 50 or fewer employees covered by the Ordinance – are exempt from this requirement.
• Posting Requirement: If employers have a facility in Chicago, they must post a notice prepared by the BACP.
• Paycheck Notice Requirement: Employers must provide employees with a copy of a notice prepared by the BACP with the first paycheck issued to an employee, with a paycheck issued to current employees within 30 days of July 1, 2024, and with a paycheck issued to employees within 30 days of July 1 of each subsequent year. If an employer uses direct deposit and employees do not receive a paper check, the employer may satisfy this requirement by emailing the notice to employees or including the notice in the employer’s handbook or paid leave policy.  For new employees, this notice may be provided prior to the start of the employee’s employment or as part of an onboarding process.
• Notice of Leave Accrued, Used, Available for Use, and Accrual Rate: Each time wages are paid, an employer must provide employees with written notice stating an updated amount of Paid Leave and Paid Sick Leave accrued and used since the last notification, amount of Paid Leave and Paid Sick Leave available for the employee’s use, and the accrual rate for these leave categories. Employers may satisfy this requirement by including the information on the employee’s paycheck or developing an online system where employees may access this information.
• Written Notice of Employer’s Policy and Policy Requirements:
  • Employers must provide employees with written notice of the employer’s policy regarding these forms of leave at time of hire and within 5 calendar days before any changes to that policy.
  • Employers must provide 14 days’ notice if the changes will impact an employee’s right to final compensation for such leave.
  • Employers’ policies should outline the steps an employee should follow to notify the employer of the employee’s need for leave and any unique circumstances under which an employer may deny a request for paid leave.
  • In addition, at least for employers with 51 or more employees covered by the Ordinance, employers must notify an employee in writing that they may request payout of their accrued, unused Paid Leave (but not Paid Sick Leave) hours if the employee has not been offered a work assignment for 60 days.  

Clarifications Provided in the Final Rules

As expected, the Final Rules further clarify employers' obligations under this new Ordinance, with many of the changes in the Final Rules favoring employees. If employers have not already done so, we advise any employer with employees working in Chicago to review their paid time off policies prior to July 1, 2024, to confirm their policy’s compliance with the Final Rules:

• Examples of Benefit Year. The Proposed Rules defined “Benefit Year” as a consecutive 12-month period to receive Paid Leave and Paid Sick Leave benefits. The Final Rules expand the definition by providing the following examples of qualifying Benefit Years: anniversary date of employment, calendar year, contract year, fiscal year, and tax year.
• Remote Workers and Telecommuters Receive Benefits.  Expanding on Rule PTO 2.03 regarding accrual from the Proposed Rules, the Final Rules explicitly address “remote workers” and “those who telecommute.” Assuming an employee satisfies the hours requirements for coverage under the Ordinance, the Final Rules explain that employees accrue both Paid Leave and Paid Sick Leave hours for any hours they work in the City of Chicago (regardless of where they may be “assigned”). Covered employees do not accrue Paid Leave or Paid Sick Leave for hours they work outside of Chicago, even if the employer is based in Chicago.
• Carryover of Paid Sick Leave Despite Frontloading. The Final Rules make a significant departure from the Proposed Rules; namely, frontloading 40 hours of Paid Sick Leave to employees does not alleviate an employer’s obligation to allow employees to carry over up to 80 hours of Paid Sick Leave from one benefit year to the next. Employers who previously found frontloading advantageous may no longer find any benefit to frontloading Paid Sick Leave.
• Eligibility to Use Paid Leave Earlier under Combined Policies. The Final Rules clarify that if an employer combines Paid Leave and Paid Sick Leave into one “bucket” of time, the employer must allow employees to begin using any accrued time in that combined bucket by the 30th day of their employment. If the two categories of leave are treated separately, employees may begin using accrued Paid Sick Leave on the 30th day of their employment but cannot begin using accrued Paid Leave until the 90th day of their employment.  Employers may find little benefit to having a combined policy that will allow employees to take double the amount of paid leave available so early after being hired, especially if they frontload the combined bucket of time.
• Written Denial of Requests for Paid Leave. The Final Rules clarify that if an employer denies an employee’s request for Paid Leave, the employer must explain the reason for any such denial in writing and state the pre-established policy rationale for the denial. This written explanation must be given to the employee immediately upon denial. In contrast, Paid Sick Leave requests may not be denied if the employee has accrued Paid Sick Leave hours available and is using it for a qualifying reason.
• Use Restricted to Employee’s Regular Work Week. The Final Rules include a provision that allows employers to restrict the use of Paid Leave or Paid Sick Leave to an employee’s regular work week. This clarification adopts many employers’ interpretation that Paid Sick Leave (and now Paid Leave) could only be used on dates/times that employees were actually scheduled to work. For example, if an employee is not scheduled to work on Monday, the employee cannot use Paid Sick Leave on that Monday to receive pay on a day they are not scheduled to work because it is not an absence from work.   
• Languages for Notice Poster. The Final Rules clarify that employers are required to post the BACP Notice in other languages where 5% or more of its employees at a jobsite speak that language.  

Action Plan

Given that the Ordinance takes effect in a few weeks, we recommend employers review their existing policies regarding paid sick leave, vacation, and/or paid time off now to ensure time for changes to be published, employees to be notified, and payroll systems to be adjusted as needed. Please consult with your Michael Best employment counsel as soon as possible for best practices on meeting the requirements of the Ordinance.