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New York City employers beware: the City's new Earned Sick Time Acttakes effect on April 1, 2014. The ESTA, which was enacted in mid-2013 over the veto of then-Mayor Michael Bloomberg, is now only about a month away from governing New York City employers. By that time, the ESTA will almost certainly be bolstered by amendments proposed by newly elected Mayor Bill de Blasio. Although Mayor de Blasio's proposals have yet to be codified and their exact language is still unknown, the ESTA is already being hailed by supporters (and bemoaned by employers) as the strongest paid sick leave law in the nation.
Under the new law, if a company's current Paid Time Off policy meets or exceeds the amount and manner of leave provided by the ESTA, then the company is in the clear. For this reason, New York City employers should proactively evaluate their current PTO policies and ensure that they are in compliance - in advance of April 1.
To facilitate this process, a summary of the ESTA's known - and currently anticipated - provisions is set forth below:
Coverage: The ESTA, and its presumed amendments, cast a wide net with their definition of "employer." The ESTA will effectively require any private employer with five or more employees (those who work "within the city of New York" for more than 80 hours in a calendar year) to provide paid sick leave to those employees. Even employers with fewer than five New York City employees must still provide unpaid sick leave. (The Act also provides special rules for the City's "domestic workers.") It remains an open question as to whether employees who "telecommute" to New York City are covered, though this would probably be a fact-intensive inquiry.
Accrual of Leave Time: Sick leave will begin to accrue for all current covered employees on April 1, or immediately for all employees hired after April 1. Sick leave must be accruable at a minimum rate of one hour for every 30 hours worked. Exempt employees (yes, this law applies to them, too) are presumed to work 40 hours per week for purposes of the ESTA. Break time generally not does not have to be counted for purposes of sick leave accrual.
Leave Time Maximum/Yearly Carry Over: Employers are required to provide only 40 hours of paid sick leave to their New York City employees per year. At year end, employers can either pay out all accrued but unused sick time (but, as the ESTA is currently written, must also provide the employee with at least 40 hours of sick leave on the first day of the new calendar year anyway) or carry over all of the employee's accrued sick leave into the next year.
Rate of Paid Leave: Pay is based upon the employee's regular wage rate in effect at the time that he or she takes sick leave. Even if the employee receives most of his or her compensation through gratuities, it appears that the ESTA requires the employer to pay only the employee's base wages (but still at the full minimum wage of $8 per hour; the tip credit does not apply because the employee on sick leave is not performing his or her typical tipped duties).
When Employees May Use Accrued Time: Employees cannot take leave under the ESTA until they have been employed for 120 days. After the employee has worked for 120 days, sick leave may be used for (1) an employee's mental or physical illness and related treatment or preventive care; (2) care of a family member; (3) closure of an employee's place of business due to a public health emergency; or (4) to care for a child whose school or child care provider has been closed due to a public health emergency.
Requirements That Employers May Impose: Employers may set a reasonable minimum increment for the use of sick time, but this minimum cannot exceed four hours per day. Employers may also require "reasonable notice" of the need to use sick time, which cannot exceed seven days before a foreseeable need, or "as soon as practicable" where the need was unforeseeable. Employers may also require that employees provide written confirmation whenever they take time off using ESTA leave.
Further, if an employee is absent for three or more consecutive days, the employer may require that the employee submit documentation from his or her health care provider respecting the need for and anticipated length of the absence. The employer cannot, however, inquire into any details relating to the medical condition.
Retaliation/Interference Claims: The ESTA expressly prohibits retaliation or threatened retaliation against an employee for asserting rights under the Act. Likewise, the ESTA prohibits interference with any ESTA-related investigation, proceeding or hearing. The ESTA expressly affords employers the right to discipline employees for using sick time for any reason not covered by the ESTA.
Relation to Wage and Hour Requirements: As mentioned above, employers must pay employees for paid leave time at the employee's regular wage rate or the regular minimum wage rate, whichever is higher. Paid leave hours do not count toward overtime calculations. Importantly, employers are not required to pay departing employees for accrued, but unused, sick leave hours.
Concurrent Leave: The Act permits sick leave to be taken concurrently with other leave (for example, leave under the federal Family and Medical Leave Act), so long as the "other" leave is provided for the same purposes as the ESTA leave and under conditions sufficient to meet the ESTA's requirements. It is strongly recommended that companies now make clear in their PTO policies and handbooks that ESTA leave will run concurrently with other employer-provided leaves to ensure that the leave-time does, in fact, do so.
Posting and Notice Requirements: Naturally, a new law comes with new posting and notice requirements. Under the ESTA, upon an employee's hire, New York City employers must provide written notice of the employee's right to sick leave, including accrual and use of leave, the applicable calendar year for that employee, the right to be free from interference or retaliation, and the right to file complaints with Department of Consumer Affairs. Employers must also post a similar notice to all employees in a "conspicuous" location at the employer's place of business. Though the Act does not expressly require employers to provide individual notices to current employees, it is best practice to provide all employees with a notice when the ESTA takes effect.
Postings and notices are not yet available online, though the Department of Consumer Affairs has been tasked with providing sample notices in various languages. Notices must be provided in each employee's primary language, so long as a sample in that language is available on the Department's website. The ESTA expressly orders the Department to create notices in Chinese, English, French-Creole, Italian, Korean, Russian, Spanish and "any other language deemed appropriate by the department."
Recordkeeping: In addition to the posting and notice requirements described above, the ESTA currently requires that employers maintain records documenting their compliance with the ESTA for a period of two years and in a format that can be provided to the Department of Consumer Affairs upon request. (The original time in which one could file an administrative complaint under the ESTA was limited to 270 days. Mayor de Blasio's recent proposal would extend this time to three years. Because the Mayor's proposed amendments are very likely to pass, employers are well advised to maintain their ESTA records for three years to match what may become the new limitations period. Indeed, Mayor de Blasio's proposed amendments may well extend the record retention requirements accordingly.)
Penalties: Penalties for improperly compensated sick leave range from $250 to three times the proper wages. Sick leave improperly denied can result in a $500 penalty. Retaliation claims for asserting ESTA rights can result in a $500 to $2,500 fine, full compensation and equitable relief. Employers can also be liable for additional civil penalties of $500 to $1,000 per ESTA violation. Violations of notice provisions are subject to a civil fine, not to exceed $50 for each employee who was not provided proper notice.
Enforcement: There is no private right of action under the ESTA. Rather, for now, the Department of Consumer Affairs is responsible for enforcing the law. Mayor de Blasio, through his proposed amendments, is expected to obtain the right to designate another agency with enforcement responsibility. Under the current version of the ESTA, employees must file a complaint with the Department of Consumer Affairs within 270 days of the date they "knew or should have known" of the alleged violation. Mayor de Blasio's proposal would extend that limitation period from 270 days to three years.
Collective Bargaining: The ESTA does not apply to employees covered under a collective bargaining agreement, if (1) the ESTA's provisions are specifically waived in the contract, and (2) the contract provides for comparable benefits in the form of paid days off through leave, compensation or other employee benefits (for example, vacation time, personal time, sick time and holiday/Sunday pay at premium rates).
Given its looming April 1 effective date, New York City employers should evaluate their current PTO policies and begin making all necessary changes to conform with the ESTA. For a more detailed analysis of this law or a legal review of your current PTO policy, please contact Amy Beth Dambeck, or the Constangy attorney of your choice.
About Constangy, Brooks & Smith, LLP
Constangy, Brooks & Smith, LLP has counseled employers on labor and employment law matters, exclusively, since 1946. A "Go To" Law Firm in Corporate Counsel and Fortune Magazine, it represents Fortune 500 corporations and small companies across the country. Its attorneys are consistently rated as top lawyers in their practice areas by sources such as Chambers USA, Martindale-Hubbell, and Top One Hundred Labor Attorneys in the United States, and the firm is top-ranked by the U.S. News & World Report/Best Lawyers Best Law Firms survey. More than 140 lawyers partner with clients to provide cost-effective legal services and sound preventive advice to enhance the employer-employee relationship. Offices are located in Alabama, California, Florida, Georgia, Illinois, Massachusetts, Missouri, New Jersey, North Carolina, South Carolina, Tennessee, Texas, Virginia and Wisconsin. For more information, visit www.constangy.com.