Category: State and Local Law

Current Status of US State Privacy Law Deluge: It’s 2024, Do You Know Where Your Privacy Program’s At?

As we begin the new year, many are wondering whether the growing list of US state privacy laws apply to them, and if so, what steps they should take to address them. For companies that gather information from consumers, especially those that offer loyalty programs, collect sensitive information, or have cybersecurity risks, these laws may be top of mind. Even for others, these may be laws that are of concern. As you prepare your new year’s resolutions -or how you will execute on them- having a centralized list of what the laws require might be helpful. So, a quick recap:

  • States With Laws: There are five state laws in effect: California, Virginia, Colorado, Connecticut and Utah. Four more go into effect this year: Florida, Oregon, and Texas (July 1) and Montana (October 1). The remainder go into effect either in 2025 (Delaware and Iowa (January 1) and Tennessee (July 1). Finally, Indiana is set to go into effect January 1, 2026.
  • Applicability: Just because you operate in these jurisdictions or collect information from those states’ residents doesn’t mean that the laws necessarily apply to your organization. For many, there are either a number of individuals and/or revenue threshold that apply. On a related front, companies will want to keep in mind the various exceptions that might apply. For example, in some states health care or financial services entities might be exempt from the state laws. And in most, the laws’ obligations are limited to the treatment of consumer information (as opposed to employee information).
  • Notice: If the laws do apply, then companies will need to keep in mind the laws’ notice obligations. Most stringent in this regard may be California and Colorado, however don’t overlook the obligations that exist in other states.
  • Rights and Choices: Companies subject to these laws will need to provide consumers with “rights” (access, deletion, correction). The type of rights and process for providing them varies slightly on a state-by-state basis. On a related front, these laws require giving consumers choices beyond those that exist under other privacy laws (CAN-SPAM’s opt-out obligation for emails, for example). This includes choices around information targeted advertising, information sale, sensitive information, and profiling. The laws also place specific obligations on companies that operate certain types of loyalty programs (that might be viewed as financial incentives).
  • Record Keeping: The laws contain some record keeping requirements that companies will want to keep in mind. These include records of rights requests and in some circumstances, data protection assessment records. This latter for companies engaged in specific activities like selling data.
  • Vendor Contracts: Those that engage third parties to collect personal information on their behalf, or share personal information with third parties, will need to keep in mind the states’ contract requirements. States that have these obligations include not just California, but others like Connecticut, Utah and Virginia.

Putting It Into Practice: As we begin the new year and set our year’s resolutions, now may be a good time to add projects around state privacy law compliance. After you have determined whether or not your company is engaging in activity that brings these laws into scope, you will want to think about how you will comply with their requirements. From notice and choice to working with third parties, there are many practical items to keep in mind for your privacy programs in 2024.

Copyright © 2023, Sheppard Mullin Richter & Hampton LLP.
For more news on 2024 US State Privacy Laws, visit the NLR Communications, Media & Internet section.

5 Trends to Watch: 2024 Artificial Intelligence

  1. Banner Year for Artificial Intelligence (AI) in Health – With AI-designed drugs entering clinical trials, growing adoption of generative AI tools in medical practices, increasing FDA approvals for AI-enabled devices, and new FDA guidance on AI usage, 2023 was a banner year for advancements in AI for medtech, healthtech, and techbio—even with the industry-wide layoffs that also hit digital and AI teams. The coming year should see continued innovation and investment in AI in areas from drug design to new devices to clinical decision support to documentation and revenue cycle management (RCM) to surgical augmented reality (AR) and more, together with the arrival of more new U.S. government guidance on and best practices for use of this fast-evolving technology.
  2. Congress and AI Regulation – Congress continues to grapple with the proper regulatory structure for AI. At a minimum, expect Congress in 2024 to continue funding AI research and the development of standards required under the Biden Administration’s October 2023 Executive Order. Congress will also debate legislation relating to the use of AI in elections, intelligence operations, military weapons systems, surveillance and reconnaissance, logistics, cybersecurity, health care, and education.
  3. New State and City Laws Governing AI’s Use in HR Decisions – Look for additional state and city laws to be enacted governing an employer’s use of AI in hiring and performance software, similar to New York City’s Local Law 144, known as the Automated Employment Decisions Tools law. More than 200 AI-related laws have been introduced in state legislatures across the country, as states move forward with their own regulation while debate over federal law continues. GT expects 2024 to bring continued guidance from the EEOC and other federal agencies, mandating notice to employees regarding the use of AI in HR-function software as well as restricting its use absent human oversight.
  4. Data Privacy Rules Collide with Use of AI – Application of existing laws to AI, both within the United States and internationally, will be a key issue as companies apply transparency, consent, automated decision making, and risk assessment requirements in existing privacy laws to AI personal information processing. U.S. states will continue to propose new privacy legislation in 2024, with new implementing regulations for previously passed laws also expected. Additionally, there’s a growing trend towards the adoption of “privacy by design” principles in AI development, ensuring privacy considerations are integrated into algorithms and platforms from the ground up. These evolving legal landscapes are not only shaping AI development but also compelling organizations to reevaluate their data strategies, balancing innovation with the imperative to protect individual privacy rights, all while trying to “future proof” AI personal information processing from privacy regulatory changes.
  5. Continued Rise in AI-Related Copyright & Patent Filings, Litigation – Expect the Patent and Copyright Offices to develop and publish guidance on issues at the intersection of AI and IP, including patent eligibility and inventorship for AI-related innovations, the scope of protection for works produced using AI, and the treatment of copyrighted works in AI training, as mandated in the Biden Administration Executive Order. IP holders are likely to become more sophisticated in how they integrate AI into their innovation and authorship workflows. And expect to see a surge in litigation around AI-generated IP, particularly given the ongoing denial of IP protection for AI-generated content and the lack of precedent in this space in general.
©2023 Greenberg Traurig, LLP. All rights reserved.
For more on AI in 2024, visit the NLR Artificial Intelligence section.

A Holiday Surprise: New York Governor Vetoes the Proposed Non-Compete Ban

On December 22, New York State Governor Kathy Hochul provided New York State employers with a welcome holiday surprise by announcing her veto to the proposed ban on non-compete agreements. As noted in our prior client alert concerning the New York legislatures’ 2023 passage of its non-compete ban bill, S3100, its restriction was expansive and would have provided a broad ban on non-compete agreements.

The bill sat on Governor Hochul’s desk awaiting her signature for several months, keeping New York State employers in a state of uncertainty. Earlier this month, Governor Hochul publicly commented that she would consider a bill which struck the right balance to protect low and middle-income workers, while she recognized that higher income workers have more negotiating power and are in industries that are an important part of New York’s economy.

In recent weeks, many anticipated that a compromise may be reached behind the scenes. While it is clear that a compromise has not yet been reached with regard to this specific bill, the Governor has stated that she is open to legislation banning agreements that limit workers’ mobility.

We will continue to monitor the situation. Given the debate concerning New York’s law in this area, as well as an evolving patchwork of state legislation nationally and a growing movement to restrict such agreements at the federal level (such as proposed by the Federal Trade Commission and the National Labor Relations Board), we recommend that employers take proactive steps now. Employers should consider evaluating their existing confidential information protections exclusive of restrictive covenants; specifically, their policies, confidentiality agreements, employee handbooks, and employee training in light of the evolving current law, and take action to update those protections.

© Copyright 2023 Sills Cummis & Gross P.C.
For more news on Noncompete Laws, visit the NLR Labor & Employment section.

New Year, New Changes for California Employers in 2024

As 2024 quickly approaches, so, too, do many new obligations and restrictions for employers with California employees.

Below, we summarize significant changes to hiring and workforce management, litigation, wage and hour, and other California employment laws taking effect in the new year.

Unless otherwise noted, all new laws discussed below will be effective as of January 1, 2024.

HIRING & WORKFORCE MANAGEMENT

Restrictive Covenants

California has long been the nation’s leader in limiting employers’ use of restrictive covenants. SB 699 and AB 1076 make the California Business and Professions Code (the “B&P Code”), which generally voids restrictive covenants in California, even stricter.

As we previously reported, SB 699 broadens the B&P Code by adding a new Section 16600.5 that:

  • provides that any agreement void thereunder is also unenforceable in California regardless of where and when the agreement was signed;
  • makes it explicitly unlawful for employers to attempt to enforce or enter into a noncompete agreement (rather than simply voiding such agreements); and
  • grants current, former, and prospective employees a private right of action against employers that attempt to enforce or enter into a noncompete agreement.

AB 1076 further builds on these prohibitions by creating a new Section 16600.1, which makes it unlawful for employers to include noncompete clauses in employment agreements or to require an employee to enter into a noncompete. In addition, as we detailed here. As noted above, prior to these amendments, the B&P Code only voided such restrictive covenants.

AB 1076 also establishes a new notice obligation with which employers must comply by February 14, 2024. Specifically, employers must notify current and former employees who were employed after January 1, 2022, and are subject to an unlawful noncompete, that such agreement or clause is void. This notice requirement also extends to remote employees (current or former) who reside in California, even if the employer has no physical presence in California, as well as former employees who did not work in California during their employment but have since moved there.

Discrimination Protections for Off-Duty Cannabis Use

For the second year in a row, California enacted new employment protections for cannabis users under the state’s Fair Employment and Housing Act (FEHA). As we outlined here, last year’s AB 2188 amended FEHA to prohibit discrimination on the basis of off-duty, off-site use of cannabis, as well as on the basis of testing positive for the presence of non-psychoactive cannabis metabolites in an employee’s or applicant’s hair, blood, or bodily fluids.

SB 700 builds on these protections by further amending FEHA to prohibit employers from inquiring about applicants’ past cannabis use. Importantly, the law exempts from coverage situations in which an employer is permitted under state or federal law to obtain information about an applicant’s prior cannabis use from the person’s criminal history. Moreover, the law does not preempt state or federal laws requiring employers to test applicants or employees for controlled substances. Both SB 700 and AB 2188 will take effect at the start of the new year.

Anti-Retaliation Protections

California law provides applicants and employees who engage in certain protected activities with a variety of anti-retaliation protections. SB 497 further expands these protections by creating a rebuttable presumption of retaliation if an employer disciplines or takes adverse action against an employee or applicant within 90 days of the employee or applicant engaging in conduct protected by California Labor Code §§ 98.6, 1102.5, and 1197.5. This protected conduct includes, but is not limited to:

  • complaining about unpaid wages;
  • complaining about unequal pay violations, including being paid at wage rates less than the rates paid to an employee of the “opposite sex”;
  • disclosing the employee’s own wages;
  • discussing the wages of others;
  • inquiring about another employee’s wages;
  • aiding and encouraging another employee to exercise their rights under the law; and
  • whistleblowing.

Employers may rebut this presumption by establishing that there was a legitimate, non-retaliatory reason for the adverse action.

Paid Sick Leave

As we previously reported, this fall, the California Legislature amended and expanded employers’ paid sick time obligations under the Healthy Workplaces, Healthy Families Act (HWHFA). The overall structure of the HWHFA remains the same, but as of January 1, 2024, SB 616 increases the amount of paid sick time that employers must provide— from three days or 24 hours to five days or 40 hours. Importantly, employers may still choose either to front-load and offer a block grant of paid sick time at the beginning of each year or to use an accrual-based method. As before, with an accrual-based policy, all unused time carries over from year to year.

For accrual-based policies, SB 616 also does the following:

  • increases the cap of paid sick leave that employees can use each year from three days or 24 hours to five days or 40 hours;
  • increases the cap of the total amount of paid leave an employee may accrue from six days or 48 hours to 10 days or 80 hours; and
  • requires that employees accrue paid sick leave at either (1) no less than one hour for every 30 hours worked or (2) an alternative rate under which employees accrue (and are allowed to use) no less than three days or 24 hours of paid sick leave by the employee’s 120th calendar day of employment and no less than the greater of five days or 40 hours of paid sick leave by the employee’s 200th calendar day of employment.

To help employers comply with their new obligations under SB 616, the California Labor Commissioner’s office recently updated its “California Paid Sick Leave: Frequently Asked Questions” guidance and published an updated Paid Sick Leave poster and employee notice.

Leave for a Reproductive Loss

SB 848 creates protected leave for eligible employees who experience a “reproductive loss.” The new law applies to employers with five or more employees, and eligible employees are those who have been employed for at least 30 days prior to the leave. Employers must grant eligible employees up to five days of leave following a reproductive loss. The law broadly defines “reproductive loss” and includes failed adoption, failed surrogacy, miscarriage, stillbirth, and unsuccessful assisted reproduction. Similar to bereavement leave, which the California Legislature enacted in 2023, reproductive leave days must be taken within three months of the loss but do not have to be taken consecutively. Reproductive loss leave is not required to be paid, but it can be paid under the employer’s existing applicable paid time off policies, such as vacation, personal leave, or sick leave.

Workplace Violence Prevention Plans

Current California Division of Occupational Safety and Health (“Cal/OSHA”) regulations require employers to adopt an Injury and Illness Prevention Program (IIPP). SB 553 requires virtually all California employers to have in place by July 1, 2024, a written Workplace Violence Prevention Plan as a stand-alone section in their IIPP or as a separate document. Importantly, employers already covered by Cal/OSHA’s Violence Prevention in Health Care standard (the “Cal/OSHA Health Care Standard”) are excepted from SB 553’s scope, given that the Cal/OSHA Health Care Standard already requires such employers to establish, implement, and maintain workplace violence prevention plans.

SB 553 outlines several specific requirements for the Workplace Violence Prevention Plan, including detailing how the employer responds to any threat or act of violence that occurs in the workplace, procedures to identify and evaluate workplace hazards, and procedures for employees to report violent incidents or threats of violence. Employers must also provide specific training on the Workplace Violence Prevention Plan to employees, including an initial training when the Workplace Violence Prevention Plan is first established and then annually thereafter. Moreover, employers are also required under SB 553 to maintain training records and a violent incident log, which identifies, among other things, where and when a violent incident occurs, the type of violence that occurred, and a description of the incident.

Along with SB 428, beginning January 1, 2025, SB 553 also adds several new protections to the process through which employers may seek temporary restraining orders (TROs) and injunctions on behalf of an employee, including:

  • allowing TROs and injunctions to be sought not only when an employee is subjected to violence or threats of violence but harassment as well, and
  • authorizing collective bargaining representatives to seek TROs and injunctions on behalf of employees.

LITIGATION

No More Automatic Stay During Appeal of Motion to Compel Arbitration

SB 365 amends the California Code of Civil Procedure to state that trial court proceedings will no longer be automatically stayed when a party appeals an order denying a petition to compel arbitration. Under SB 365, beginning in the new year, courts are permitted to exercise discretion as to whether to stay trial court proceedings while an appeal is heard. This is significant because should a court determine that a stay is not warranted, an employer may be forced to continue defending itself in court from claims that may yet ultimately be subject to arbitration if the employer’s appeal is successful.

Privileged Communications Regarding Sexual Assault, Harassment, or Discrimination

Current California law makes certain publications and communications privileged, meaning that individuals who make the communications may be protected from liability for libel and slander. Included among these privileged communications are those related to sexual harassment. As such, if an employee makes a complaint of sexual harassment, without malice, to an employer, California law provides that the employee may not be liable for making such complaints.

AB 933 expands the types of communications that are privileged from liability to include communications regarding:

  • sexual assault;
  • sexual harassment;
  • an act of workplace harassment or discrimination, failure to prevent an act of workplace harassment or discrimination or an act of retaliation against a person for reporting workplace harassment or discrimination; and
  • an act of cybersexual bullying.

Individuals who have made such a communication may assert the privilege to bar liability if they are sued for making defamatory statements based on their own experience as victims of such incidents. In addition, such individuals may recover attorneys’ fees and costs, treble damages, and punitive damages if they prevail in a suit for defamation.

WAGE & HOUR

Wage Theft & Misclassification

AB 594 temporarily authorizes prosecutors through January 1, 2029, to pursue civil or criminal actions against employers that violate California Labor Code provisions related to wage theft and misclassification. Courts can grant prosecutors, including city, county, and state prosecutors, the Attorney General, and district attorneys, money damages (which must first be applied to employee payments), injunctive relief, and reasonable attorneys’ fees and costs that the Labor Commissioner would be entitled to seek. In addition, AB 594 clarifies that with respect to prosecutorial actions, any agreement between an employee and employer that purports to limit representative actions or to mandate private arbitration will not apply.

Minimum Wage

California’s minimum wage rate will increase to $16.00 per hour for all employers, regardless of size. This increase from $15.50 per hour is a result of an inflation adjustment made pursuant to Labor Code § 1182.12, which requires the California Director of Finance to calculate and increase the minimum wage depending upon the U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers.

This increase also affects wage and hour exemptions that are based upon a salary floor that is two times the state minimum wage, such as the administrative, professional, and executive exemptions. As such, beginning January 1, 2024, the minimum salary threshold for these exemptions will increase to $66,560 per year.

Additionally, the minimum compensation threshold for the computer software exemption, which is not tied to the minimum wage rate like the administrative, professional, and executive exemptions, will also increase in 2024. For salaried employees, this threshold will be $115,763.35 per year. For hourly employees, this threshold will be $55.58 per hour. Employees must also continue to meet the applicable duties test to qualify for an exemption.

As a reminder, municipalities also continue to set local minimum wages that are higher than the state requirement.

Wage Notices

AB 636 amends the notice requirements for the Wage Theft Prevention Notices that employers must provide to nonexempt employees in California. In addition to the previously required information, such as rate of pay, regular payday, and right to paid sick leave, AB 636 requires that wage notices also contain information about the existence of a federal or state-declared emergency in the county where the employee is to be employed if it was issued within 30 days before the employee’s first day of work and may affect the employee’s health and safety during employment. The California Department of Industrial Relations has published a template that reflects this newly required information, as well as the amended paid sick leave requirements under SB 616.

In addition, AB 636 adds information required in notices for employees in California under an H-2A agricultural visa. This includes information describing employees’ rights and protections, including the right to meal and rest periods, transportation travel time, and employee housing rights. This new information for agricultural visa workers must be included in the wage notice starting March 15, 2024.

INDUSTRY-SPECIFIC AND OTHER BILLS

Health Care

SB 525 establishes new minimum wage rates for covered health care employees at covered health care facilities as of June 1, 2024. The law defines these terms as follows:

  • “Covered health care facilities” include, but are not limited to, facilities part of an integrated health care delivery system, acute care hospitals, acute psychiatric hospitals, special hospitals, licensed skilled nursing facilities (if owned, operated, or controlled by a hospital, integrated health care delivery system, or health care system), licensed home health agencies, outpatient clinics of hospitals, community clinics, urgent care clinics, physician groups, county correctional facilities that provide health care services, and ambulatory surgical centers certified to participate in Medicare.
  • “Covered health care employees” are those who provide patient care, health care services, or services supporting the provision of health care. They include contracted or subcontracted employees under certain circumstances.

The relevant minimum wage rate varies under the law depending on which of four tiers the covered health care facility falls within. For example, covered health care facilities with at least 10,000 full-time employees fall within the first tier of SB 525, so the minimum wage for these facilities’ covered health care employees is as follows:

  • From June 1, 2024, to May 31, 2025, inclusive, $23 per hour;
  • From June 1, 2025, to May 31, 2026, inclusive, $24 per hour; and
  • From June 1, 2026, and until adjusted below, $25 per hour.

Additional information regarding the four tiers, including which covered health care facilities are included therein and the minimum wage schedule applicable thereto, is available here.

Fast Food

Last year, California revolutionized the fast food industry when it adopted AB 257, also known as the Fast Food Accountability and Standards Recovery Act (the “FAST Recovery Act”). As of January 1, 2023, the FAST Recovery Act was supposed to create, among other things, a Fast Food Council responsible for establishing and implementing binding minimum standards for wages, hours, training, and working conditions. However, a court order stayed the law from taking effect late last year pending the outcome of a voter referendum scheduled for November 2024 (the “Referendum”).

This year, legislators worked with fast food industry and labor union representatives to reach a compromise in the form of AB 1228, which raises the minimum wage for fast food workers and significantly modifies the FAST Recovery Act. Provided that its supporters withdraw the Referendum by January 1, 2024, AB 1288, until January 1, 2029, repeals the FAST Recovery Act and establishes a Fast Food Council with more limited authority to recommend employment regulations. AB 1228 also eliminates provisions in the prior law regarding joint liability for fast food franchisors for their franchisees’ civil liability for employment law violations.

In addition, beginning April 1, 2024, AB 1228 raises the minimum wage rate for fast food workers in the state to $20 per hour. Beginning January 1, 2025, AB 1228 authorizes the Fast Food Council to establish annual minimum wage increases through January 1, 2029, up to 3.5 percent or the rate of change in the U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers, whichever is lower. The law also preempts local municipalities from establishing higher minimum wage rates for fast food restaurant employees specifically; however, local municipalities are still permitted under the law to establish a higher minimum wage that is generally applicable to all industries.

Importantly, AB 1228 applies to “national fast food chains,” which the law defines as limited-service restaurants that share a common brand or are characterized by standard options for décor, marketing, packaging, products, etc., and are primarily engaged in providing food and beverages for immediate or off-premises consumption.

Hospitality and Business Service Providers

In the spring of 2021, California enacted legislation (SB 93) requiring covered employers in the hospitality and business services industry to notify and offer to rehire qualified former employees who were laid off during the COVID-19 pandemic. “Covered employers” include hotels or private clubs with 50 or more guest rooms, airports, airport service providers, event centers, and, in certain situations, retail and commercial buildings. Under SB 93, eligible employees are only entitled to these recall rights through December 31, 2024.

SB 723 broadens the scope of employees’ recall rights under SB 93 in three important ways. First, SB 723 expands the definition of “laid-off employees” who are entitled to recall rights. Under SB 93, “laid-off employees” are those workers: (1) who were employed by their employer for at least six months during the 12-month period before January 1, 2020, and (2) whose most recent separation from active service was due to the pandemic. Under SB 723, “laid-off employees” are those workers: (1) who were employed by their employer for at least six months; (2) whose most recent separation from active employment occurred on or after March 4, 2020; and (3) whose most recent separation from active employment was due to the pandemic.

Second, SB 723 establishes a presumption for determining whether a separation from active employment is “due to the pandemic.” Under the new law, separations due to a lack of business, a reduction in force, or other economic/non-disciplinary reasons will be presumed to be a result of the pandemic.

Finally, SB 723 extends the law’s sunset from December 31, 2024, to December 31, 2025.

WHAT EMPLOYERS SHOULD DO NOW

  • Consult with counsel regarding agreements with current and former employees to determine whether any contain any unlawful restrictive covenants. Revise any such agreements, as necessary, to comply with SB 699 and AB 1076.
  • Identify any current employees or former employees who were employed after January 1, 2022, who may be subject to an unlawful noncompete provision, and send them a compliant notice under AB 1076 by February 14, 2024.
  • Seek advice from counsel before attempting to enforce restrictive covenants against current, former, or prospective employees in California.
  • Review drug-screening policies and practices to ensure that you do not screen for non-psychoactive cannabis metabolites except as explicitly permitted under AB 2188.
  • Review interview, onboarding, and hiring policies and practices to ensure that you do not inquire about an applicant’s past cannabis use unless specifically permitted under SB 700.
  • If not already in place, adopt a compliant Workplace Violence Prevention Plan or update your IIPP to include the same.
  • Train employees regarding the Workplace Violence Prevention Plan and implement a process for maintaining relevant training and compliance records and a violent incident log.
  • Ensure there is a robust system for documenting any disciplinary or other adverse action taken against employees in light of the rebuttable presumption established under SB 497.
  • Review and revise leave of absence policies and practices to add protected time off for reproductive loss, and train managers and human resources personnel to appropriately respond to and track this leave.
  • Update paid sick leave policies to comply with SB 616, post the Labor Commissioner’s updated paid sick leave poster, and distribute the Labor Commissioner’s updated employee notice.
  • Review hourly wage rates for nonexempt employees and salary levels for employees who are exempt under the professional, administrative, and executive exemptions to ensure they continue to meet new wage requirements.
  • Prepare to use the updated Wage Theft Prevention Notice template (or revise your current notice if not using the template) for nonexempt employees hired on or after January 1, 2024.
  • If you are an employer in the health care sector, fast food, or hospitality/business services, review your policies and practices to ensure that they comply with the new industry-specific laws.
©2023 Epstein Becker & Green, P.C. All rights reserved.
For more news on 2024 California Employment Laws, visit the NLR Labor & Employment section.

Looking Ahead: New California Employment Laws for 2024

In the past few months, California Governor Newsom has signed numerous new employment laws affecting California employers of all sizes. Below is a summary of some of the laws going into effect in 2024.

Workplace Violence Prevention Safety Plan

California will become the first state to demand employers to create an “effective” workplace violence prevention plan, train employees, and prepare/maintain records regarding workplace violence, starting July 1, 2024. SB 553 covers virtually all employers. “Workplace violence” is defined as “any act of violence or threat of violence that occurs in a place of employment that results in, or has a high likelihood of resulting in, injury, psychological trauma, or stress, regardless of whether the employee sustains an injury.”

Not only must employers prepare a written prevention plan that is accessible to employees, they are also required to keep a “log” of every “workplace violence incident” and implement requisite training when the plan is first established. Moving forward, employers will need to provide training on an annual basis. Additionally, certain training records must be maintained for one to five years, depending on the type of record. For more information on the new law, please review Sheppard’s recent blog post on this topic here.

Paid Sick Leave Expansion

SB 616 amends California’s Healthy Workplaces, Healthy Families Act of 2014 to raise the amount of paid sick time employees can obtain each year from three to five days (or 40 hours) for full-time employees. The law also expands the annual accrual limit from six days (or 48 hours) to 10 days (or 80 hours).

Employers using the “front-loading” method of allowing paid sick leave must now supply five days (40 hours) at the beginning of the year. Employers using a different accrual process must now guarantee an employee has at least 40 hours of accrued sick leave by the 200th calendar day of employment, in addition to the requirement that employees have at least three days (24 hours) by the 120th day of employment. Employees must be allowed to use at least five days (40 hours) each year. For additional information, please review Sheppard’s recent blog post on this topic here.

Minimum Wage Increases

On January 1, 2024, the statewide minimum wage will increase to $16 per hour. The minimum exempt salary for California employees will rise from $64,480 to $66,560. In addition to the increase in the state minimum wage, many localities have their own minimum wage requirements that are higher than the state’s minimum wage.

Notably, the minimum wage increase for specific industry employers, such as healthcare facilities, begins June 1, 2024. The new minimum wage for healthcare facilities will range from $18 to $23 per hour, depending on the size and location of the facility. Fast food workers will also see a similar increase, to $20 per hour, beginning April 1, 2024.

No Automatic Stay During Appeals of Motions to Compel Arbitration Decisions

SB 365 amends the California Code of Civil Procedure with the intention of not automatically staying trial court proceedings when a party appeals an order denying a motion to compel arbitration. This law allows courts to use their discretion as to whether to stay proceedings while an appeal is heard. The law will likely be contested in court, on the basis that it is preempted by the Federal Arbitration Act (“FAA”). For additional information, please review Sheppard’s recent blog post on this topic here.

Prosecution for California Labor Code Violations

AB 594 empowers local prosecutors to pursue a civil or criminal action for violations of the California labor code that arise within their jurisdiction. The law also states that any agreement between the employer and employee that attempts to “limit representative actions or to mandate private arbitration” will not be enforceable.

Rebuttable Presumption of Retaliation

SB 497, known colloquially as the “Equal Pay and Anti-Retaliation Act, amends the California Labor Code to create a rebuttable presumption of retaliation if an employee is disciplined or terminated within 90 days of engaging in certain protected activity. Employers also are responsible for a civil penalty of up to $10,000 per employee for each violation, to be awarded to the employee who faced retaliation. For more information on the new law, please review Sheppard’s recent blog post on this topic here.

Reproductive Loss Leave

SB 848 requires employers to offer a leave of up to five days following a “reproductive loss event,” which is “the day or, for a multiple-day event, the final day of a failed adoption, failed surrogacy, miscarriage, stillbirth, or an unsuccessful assisted reproduction.” The leave is restricted to 20 days within a 12-month period, and employees must be allowed to take their leave non-consecutively. Leave may be unpaid, but employees must be permitted use sick leave or other paid time off if they so choose. Information provided to the employer by the employee relating to the leave must remain confidential and cannot be disclosed, unless required by law. SB 848 also forbids retaliation for an employee’s use of this leave.

Noncompete Agreements

SB 699, which becomes operative January 1, 2024, clarifies that existing law prohibits noncompetition covenants regardless of where or when the agreement was signed, even if the covenant was signed outside of the state. An employer will now commit a civil violation for entering into or enforcing a void noncompete. Employees will also now have a private cause of action against their employer.

In a similar vein, AB 1076 requires employers to contact all current or former employees who were employed after January 1, 2022, and had (or have) contracts containing a noncompete clause, informing them that the noncompete clause is void. The notice must be completed by February 14, 2024, and is required to be in writing and delivered to both the last known physical address and email address of the employee. If an employer fails to send this notice, it constitutes a violation of California’s Unfair Competition Law. For additional information, please review Sheppard’s recent blog post here.

Emergency or Disaster Declaration Information

Effective January 1, 2024, AB 636 expands the information required in employers’ wage theft notices. This new law requires these notices include information regarding “[t]he existence of a federal or state emergency or disaster declaration applicable to the county or counties where the employee is to be employed” that affect employees’ health and safety during their employment. While the California Labor Commissioner’s office is preparing a notice template by March 1, 2024, employers should bring their notices up-to-date in the interim.

Cannabis Use

AB 2188 amends the California Fair Employment and Housing Act (“FEHA”) to prohibit an employer from discriminating against an employee or applicant because of the employee’s or applicant’s cannabis use off the job and away from work. Notably, this new law does not permit an employee to possess, be impaired by, or use cannabis while working, meaning employers may continue to enforce any policies they have prohibiting employees from possessing, being impaired by, or using cannabis while on the job. For additional information on the protections around employees’ cannabis use, please review Sheppard’s blog post here.

Takeaways

These new employment laws are extensive. Employers should evaluate and revise relevant policies and practices, including employee handbooks and employment agreements containing restrictive covenants, to ensure compliance. Employers should also start preparing workplace violence prevention plans to be in compliance by July 1, 2024.

Copyright © 2023, Sheppard Mullin Richter & Hampton LLP.
For more news on 2024 California Employment Laws, visit the NLR Labor & Employment section.

New York Further Limits Scope of Non-Disclosure Agreements in Employment Discrimination Cases

On November 17, 2023, New York Governor Hochul signed a bill into law making significant changes to New York’s law on nondisclosure agreements.  The amendments went into effect immediately and apply to agreements entered into on or after the effective date.  There are three key changes that further restrict the use of NDA provisions in certain employment settlement agreements. On the whole, these changes are good for New York employees who have experienced harassment, discrimination, or retaliation in the workplace.

New York’s Non-Disclosure Agreement Laws
First, to provide some background on New York’s Non-Disclosure law: in 2018, in the midst of the #MeToo movement, the New York legislature passed into law budget bill S. 7507–C, which provided for the addition of an entirely new section into the New York General Obligations Law, Section 5-336.  Section 5-366, one of the original #MeToo statutes, was intended to limit the use of confidentiality agreements that prevent victims of sexual harassment from disclosing the harassing conduct in a way that might prevent future harassment.

Originally, Section 5-336 provided that no employer could include a non-disclosure condition in a “settlement, agreement or other resolution of any claim” involving sexual harassment, unless the “condition of confidentiality is the complainant’s preference” and the complainant was provided twenty-one days to consider the condition plus seven days to revoke the agreement after signing it.  In other words, a non-disclosure could only be included in an employment settlement involving claims of sexual harassment if the term was the complainant’s choice, and if the parties complied with the twenty-one day consideration time period, plus the seven-day revocation period.  Bill S. 7507-C also added a new section to New York’s civil practice law, NY CPLR § 5003-b, which applied the same restrictions to non-disclosure agreements included in stipulations, decrees, or settlement agreements for filed claims or causes of action.

In 2019, New York amended the statute with bill A. 8421 to ensure that the law’s non-disclosure restrictions apply to any prohibited discrimination: the 2018 law only applied to claims invol+ving sexual harassment.  The 2019 amendments also required that any such non-disclosure condition must be provided in writing in plain English (and, if applicable, the primary language of the complainant) before the twenty-one day consideration time period could start.

In addition, the 2019 amendments clarified that any such nondisclosure condition is void if it restricts the complainant from participating in several activities, including testifying or complying with a subpoena conducted by the appropriate local, state, or federal agency, or filing or disclosing facts required to receive unemployment insurance or other public benefits to which the complainant is entitled.

Finally, the 2019 amendments expanded the law’s applicability to a “contract or other agreement” between an employer and an employee or potential employee that “prevents the disclosure of factual information related to any future claim of discrimination” unless such provision notifies the employee or potential employee that the provision does not prohibit them from speaking with law enforcement, the Equal Employment Opportunity Commission, the state division on human rights, a local commission on human rights, or an attorney retained by the employee or potential employee.  While not as expansive as the 2018 and 2019 restrictions to nondisclosure conditions included as a part of post-claim settlement agreements, the 2019 amendment importantly extended some boundaries to employment contracts to restrict employers from limiting employees and prospective employees from later speaking out about claims of discrimination under the enumerated circumstances.

Gaps in New York’s Non-Disclosure Agreement Laws Pre-2023
As discussed above, originally, Section 5-336 prohibited employers from requiring a nondisclosure provision in a release agreement involving claims of discrimination, unless confidentiality was the employee’s preference and the employee was given twenty-one days to consider the agreement and then seven days to revoke it.  In practice, this meant that, even if the employee preferred the inclusion of a nondisclosure agreement in the release agreement, the agreement could not go into effect (and the employee could not receive any settlement payment) at least until after the passage of twenty-eight days.  This lengthy delay had little, if any, effect on employees’ desire (or lack thereof) to include a nondisclosure provision in the agreement, and only resulted in considerable delay in finalizing settlements.

Furthermore, originally, employers were permitted to include penalizing liquidated damages and clawback provisions in nondisclosure agreements.  These sometimes required the employee to pay back the entire settlement payment plus exorbitant liquidated damages in the case of breach.  These extreme provisions sometimes spooked employees from settling, fearful that a vindictive employer might accuse them of breach to embroil them in an expensive lawsuit about whether a breach had occurred.

Finally, originally, Section 5-336 applied only to claims involving “discrimination,” but did not specify whether it also applied to claims involving retaliation for reporting discrimination, or for claims involving discriminatory harassment.  This meant that some employees who had experienced discriminatory harassment in the workplace, or who had reported discrimination and were retaliated against for doing so, could be forced into signing nondisclosure agreements without any of the restrictions provided by Section 5-336.

The Key Changes to New York’s Non-Disclosure Agreement Law
Responsive to these shortcomings, New York bill S4516, signed into law and effective immediately on November 17, 2023, amends Section 5-336 of the New York General Obligations Law in three ways.

First, and most prominently, employers settling claims of unlawful discrimination, including discriminatory harassment, or retaliation, may not include a term or condition that requires the employee to:

  1. Pay liquidated damages if they violate the nondisclosure or nondisparagement clause;
  2. Forfeit all or part of the consideration (payment) for the agreement if they violate the nondisclosure or nondisparagement clause; or
  3. Make an affirmative statement, assertion, or disclaimer that the employee was not subject to unlawful discrimination, harassment, or retaliation.

It is not entirely clear whether Section 5-336, as amended, applies to asserted claims that are being resolved by agreement as well as to standard separation agreements where no claim has been asserted.  The newly added Section 5-336(3) states that “no release of any claim” shall be enforceable if the above unlawful provisions are included.  The broad “no release of any claim” language suggests that the legislature intended this section to apply to all release agreements, including standard separation agreements or any agreement before claims have been asserted, such as the employment contracts discussed above.  However, some paragraphs in the statute, including Section 5-336(3), are limited to agreements “resolving such claim[s],” which may indicate that the amended section applies only to agreements resolving asserted claims and not to pre-claim release agreements.  Until a court clarifies whether the requirement applies only to agreements resolving asserted claims, parties might elect to remove these terms from pre-claim release agreements to ensure compliance with the new law.

Note that the 2023 amendments expand Section 5-336 to address the gap mentioned above: now, nondisclosure conditions in settlements resolving claims of discrimination, discriminatory harassment, or retaliation, are all restricted by the same measures.

The second key change added by the recent amendments effective November 17, 2023, is that the previously mandatory twenty-one-day consideration period is now waivable (“the complainant shall have up to twenty-one days to consider [a confidentiality provision]”) pre-litigation.  However, the twenty-one-day consideration period is still mandatory if the discrimination claim has been filed in court, pursuant to N.Y. CPLR § 5003-B.  Furthermore, the amendments do not change the seven-day revocation period.  Therefore, while an employee may choose to waive the twenty-one-day period for a nondisclosure provision in a pre-litigation settlement agreement, the seven-day revocation period is still mandatory.  Hopefully, this will ease up tensions at the end of settlement negotiations and permit employees and employers to resolve their disputes quickly.

Third, in addition to the above key changes, the recent amendments state that Section 5-336 now applies to independent contractors, in addition to employees and potential employees.  As of October 2019, the New York State Human Rights Law (NYSHRL) protects both employees and nonemployees, such as contractors, subcontractors, temporary workers, “gig” workers, and other non-employee persons providing services pursuant to a contract, from discrimination, discriminatory harassment, and retaliation.  With the 2023 amendments to Section 5-336, now independent contractors already protected from discrimination by the NYSHRL can take advantage of the same protections from nondisclosure agreements as employees.

Impact of the Amendment and Implications for Employees
These amendments are sure to have a considerable impact on employees’ settlement negotiations with employers.  New York employers are still able to pursue claims for breach of nondisclosure or nondisparagement clauses, but they are no longer able to set an agreed-upon liquidated damages amount or clawback the consideration provided.  This change therefore places more power in the hands of employees.  However, employers may feel more vulnerable to breach following these amendments, and offer lower settlement amounts because they are less willing to settle absent a liquidated damages or clawback provision.  However, if one goal of amending the law is to equalize the parties’ bargaining power, these amendments are one step towards that goal because they reinforce the principle that employers should not be able to, and now cannot, pressure employees into draconian liquidated damages and clawback provisions.

Importantly, these amendments also forbid the inclusion of an affirmative disclaimer that the employee was not subject to unlawful discrimination, harassment, or retaliation.  While in practice, these disclaimers seem to be of limited practical value, employers have historically pushed for their inclusion in settlements involving these claims.  It is therefore good news for employees that these disclaimers are now unlawful.

Failure to abide by the new law may render nondisclosure provisions with these objectionable terms unenforceable.  Employees and their counsel should carefully review their New York separation, severance, and settlement agreements to ensure compliance with the amended Section 5-336.

Katz Banks Kumin LLP Copyright ©
For more news on New York NDAs in Employment Cases, visit the NLR Labor & Employment sections.

Chicago’s New Paid Leave and Paid Sick Leave Ordinance Delayed Six Months

Just over a month after passing the Chicago Paid Leave and Paid Sick Leave Ordinance (the Ordinance), which brought sweeping new paid leave and paid sick leave requirements to employers with Chicago employees, the city has amended the Ordinance to delay its effective date and limit the number of covered employees.

As amended, the Ordinance will not take effect until July 1, 2024, rather than December 31, 2023. In addition, the Ordinance no longer covers employees who have worked merely two hours within the city in any two-week period. Instead, the Ordinance now reverts to the definition of “Covered Employee” found in the current Chicago and Cook County paid sick leave ordinances: an employee who has worked at least 80 hours in any 120-day period within the city’s geographic limits.

The amended Ordinance also potentially gives employers an opportunity to remedy Ordinance violations before being subject to claims for non-compliance. Specifically, employees will be prohibited from filing claims against their employers until the earlier of 16 days or the next regular payday after the employer’s alleged violation. While described by some as a “cure” period, there is no requirement that an employee actually notify their employer of an alleged violation before bringing a claim. For employers concerned about fielding claims for inadvertent violations, this change may be small comfort.

With the effective date of the Ordinance delayed until July 1, 2024, Chicago employers now have six more months to prepare for its new requirements. In the meantime, the city’s current paid sick leave ordinance remains in effect, so for now that benefit is business as usual for Chicago employers.

© 2023 Much Shelist, P.C.
For more news on Chicago’s Paid Sick Leave Ordinance, visit the NLR Labor & Employment section.

The Limits of Deference to Agency Interpretations Under Maine Law

Earlier this month, the Maine Law Court issued its decision in Cassidy Holdings, LLC v. Aroostook County Commissioners, holding that, in a municipality without a board of assessment review, a taxpayer whose nonresidential property is valued at $1 million or more has the option to appeal an assessment either to the county commissioners or to the State Board of Property Tax Review. The decision has been described by my excellent colleagues, Jon Block and Olga Goldberg.  For purposes of this blog, it is noteworthy that that Cassidy Holdings took up an issue of broad application: the extent of deference owed to changing agency interpretations of a state law.

In Cassidy Holdings, the county commissioners cited a Tax Bulletin issued by Maine Revenue Services as support for their statutory interpretation argument.  The interpretive guidance provided by the Maine Revenue Services, however, had changed over time.  Initially, the agency had taken the position that appeals could go either to the county commissioners or the state board; later, without explanation, the agency changed its guidance to state that appeals should be taken to the state board.  This change raised the question whether the agency’s statutory interpretation should be granted judicial deference.

The Law Court did not have to resolve this issue, because it reached its conclusion based on the plain and unambiguous meaning of the statutory language.  Nevertheless, the Court found this issue to be of sufficient importance to address in a lengthy footnote.  While acknowledging that an “agency is free to change its mind in its interpretation of a statute,” Justice Connors, writing for the Court, made clear that Maine courts should not give deference to an agency interpretation when the agency has taken a new position without reasoned explanation.  For deference to be owed,

the agency must acknowledge that it is making a change, explain why, and give due consideration to the serious reliance interests on the old policy.

The Court cited numerous federal authorities in support of its conclusion that an agency must explain its change in position.

This footnote is notable on several levels.  First, although this issue had been addressed by federal courts, the Law Court had not previously opined on this particular limitation to Chevron-style judicial deference to agency interpretations of state law.  This limitation promises to have application in a wide variety of cases.  Second, the Law Court’s articulation of this limitation on Chevron­-style deference is a reminder of the unusual standing of that doctrine under Maine law.  As previously discussed on this blog, the Law Court has never addressed how the federal Chevron doctrine of judicial deference to agency interpretations of state law relates to Maine’s strict separation of powers doctrine.  That issue promises to come into stark relief early next year, when the Supreme Court will consider a pair of cases challenging the Chevron doctrine.  Given the Law Court’s recent emphasis on the primacy doctrine, together with any potential changes to the Chevron doctrine at the federal level, the Court may well confront additional issues relating to the application of Chevron deference in the near future.

©2023 Pierce Atwood LLP. All rights reserved.
For more news on Maine property taxes, visit the NLR Real Estate section.

Be Prepared for Significant Employment Law Changes in 2024

The year 2023 brought many changes to Illinois labor and employment law. As the year ends, it is important to make sure you are ready for the laws that go into effect January 1, 2024. Taking the time to review your policies and procedures before the start of the New Year mitigates the chance of a surprise violation. When updating your policies and procedures for your business, consider the following:

  • The Chicago Paid Leave and Paid Sick and Safe Leave Ordinance will require covered employers to provide minimum paid leave for employees in Chicago;
  • The Paid Leave for All Workers Act implements minimum paid leave for workers in Illinois;
  • The Illinois Transportation Benefits Program Act will mandate certain pre-tax commuter benefits;
  • Amendments to the Equal Pay Act of 2003 with HB 4604 and HB 3129 will require covered employers to submit a filing with the Illinois Department of Labor;
  • Amendment to the Day and Temporary Labor Services Act with HB 2862 imposes certain equal pay and benefits requirements on covered temporary laborers; and
  • The Annual Illinois Minimum Wage Increase will increase the state minimum wage rates.
© 2023 Chuhak & Tecson P.C.
For more news on Illinois labor and employment laws, visit the NLR Labor & Employment section.

Chicago Employers: Prepare for New Paid Leave Ordinance Effective 31 December 2023

On 9 November 2023, the Chicago City Council passed the Chicago Paid Leave and Paid Sick and Safe Leave Ordinance1(the Ordinance). The Ordinance takes effect on 31 December 2023, and replaces Chicago’s current paid sick leave ordinance.2 Under the Ordinance, starting 1 January 2024, Chicago employees are entitled to up to 80 hours of paid time off in a 12-month period, with 40 hours allocated to paid sick leave and 40 hours allocated to general paid leave.

The Ordinance comes eight months after the Illinois legislature’s enactment of the Illinois Paid Leave for All Workers Act (PLAWA),3 which goes into effect on 1 January 2024 and guarantees that Illinois workers can earn or accrue up to 40 hours of paid leave per year that may be used for any reason. Although employers covered by the Ordinance are exempt from PLAWA,4 the Ordinance adopts PLAWA’s purpose of providing general paid leave to employees in addition to paid sick leave.

METHOD FOR ACCRUAL, CARRYOVER, AND FRONTLOADING

The Ordinance provides that a covered employee5 will accrue one hour of general paid leave and one hour of paid sick leave for every 35 hours worked. Both general paid leave and paid sick leave are accrued in hourly increments and the total accrual for both forms of leave is capped at 40 hours in a 12-month period. At the end of the 12-month period, covered employees are allowed to carryover up to 16 hours of general paid leave and up to 80 hours of paid sick leave to the subsequent 12-month period. Chicago employers may also choose to “front-load,” or grant, 40 hours of paid leave or 40 hours of paid sick leave (or both) on the first day of employment or on the first day of the 12-month period.  If an employer elects to front-load general paid leave hours, the employer is not required to allow employees to carry over unused general paid leave hours to the following 12-month period. However, employers must allow employees to carry over up to 80 hours of paid sick leave into the next 12-month period even if the leave is front-loaded.

USE OF LEAVE

Employers must allow covered employees to use accrued paid sick leave after completing 30 days of employment, and use accrued general paid leave after completing 90 days of employment. An employer may set a reasonable usage minimum increment, not to exceed four hours per day for paid leave or two hours per day for paid sick leave. If a covered employee’s scheduled workday is less than such minimum increments, then the minimum increment of time cannot exceed the covered employee’s regular scheduled workday.

Similar to the PLAWA, general paid leave under the Ordinance may be used for any reason and employees cannot be required to provide a reason for or documentation to support the leave. Paid sick leave may be used for the same reasons set forth under the current Chicago paid sick leave ordinance, including:

  • For illness or injury, or for the purpose of receiving professional care, which includes preventive care, diagnosis, or treatment for medical, mental, or behavioral issues, including substance use disorders;
  • For a family member’s illness, injury, or order to quarantine, or to care for a family member receiving professional care;
  • For domestic violence, or if a covered employee’s family is the victim of domestic violence;
  • If the covered 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
  • For the covered employee to obey 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 stay at home to minimize the transmission of a communicable disease; to remain at home while experiencing symptoms or sick with a communicable disease; and to obey a quarantine order or an isolation order issued to the employee.

REQUESTING LEAVE

For general paid leave, an employer may require a covered employee to provide reasonable notice not to exceed seven days prior to the need for leave and may require preapproval to ensure continuity of business operations. An employer may also require seven days’ notice for paid sick leave. If the need for paid sick leave is not reasonably foreseeable, an employer may require a covered employee to give notice as soon as is practicable by notifying the employer by phone, email, or other means. The Ordinance defines “reasonably foreseeable” as including, but not limited to, prescheduled appointments with health care providers and court dates in domestic violence cases.

If a covered employee uses paid sick leave to be absent for more than three consecutive work days, the employer may require certification that the paid sick leave was used for a qualifying purpose. For health-related paid sick leave, this certification can be documentation signed by a licensed health care provider. For domestic violence-related paid sick leave this certification can be a police report, court document, or a signed statement from an attorney, a member of the clergy, or a victim services advocate. An employer may not delay the commencement of paid sick leave or delay payment of wages based on not receiving the required documentation or certification. However, an employer can take disciplinary action, up to and including termination, against a covered employee who uses paid sick leave for purposes other than those described in the Ordinance.

PAYMENT OF PAID LEAVE AND PAID SICK LEAVE

The Ordinance sets forth general requirements relating to the payment of general paid leave and paid sick leave. General paid leave and paid sick leave must be compensated at the employee’s regular rate of pay, including health care benefits. The regular rate of pay for nonexempt or hourly employees is calculated by dividing the employee’s total wages by total hours worked in full pay periods of the prior 90 days of employment.  Wages do not include overtime pay, premium pay, gratuities, or commissions. Employers must pay an employee for their general paid leave and paid sick leave by the next regular payroll period after the time off was taken.

PAYMENT OF PAID LEAVE UPON TERMINATION

Under the Ordinance, an employer with 50 covered employees or less is not required to pay out any accrued, unused general paid leave upon termination. An employer with 51 to 100 covered employees (Medium Employer) must pay out accrued, unused general paid leave, up to 16 hours, until 31 December 2024. On or after 1 January 2025, a Medium Employer must pay all accrued, unused paid general leave upon an employee’s termination for any reason. Unless otherwise provided in a collective bargaining agreement, an employer cannot enforce a contract or a policy that requires the employee to forfeit any earned general paid leave upon separation from employment. Employers are not required to pay out accrued, unused paid sick leave.

Further, all unused paid sick leave and paid general leave is retained by the covered employee if the employer sells, transfers, or assigns the business to another employer and the employee continues to work in the City of Chicago.

EXISTING LEAVE POLICIES AND UNLIMITED PAID TIME OFF PROGRAMS

If a covered employee accrues paid sick leave before 1 January 2024 and the employer’s existing paid time off policy does not comply with the Ordinance, then on 1 January 2024, any paid sick leave that the covered employee is entitled to will rollover to the next 12-month period.

For employers that have recently adopted “unlimited paid time off policies,” the Ordinance provides that employers may offer unlimited paid time off policies and so long as the covered employer provides unlimited paid time off at the beginning of employment or the start of a 12-month period, there is no requirement to permit carryover of unused general paid leave to the next year. However, employees must still be allowed to carry over up to 80 hours of paid sick leave. Although the covered employer may still require reasonable notice for both foreseeable and unforeseeable reasons for leave, it may not require preapproval for such leave. Further, if the employer has an unlimited paid time off policy, upon separation from employment (or transfer outside of the City of Chicago’s boundaries), employers must pay the monetary equivalent of 40 hours of general paid leave less the amount of general paid leave used by the covered employee during the prior 12-month period preceding separation of employment (or transfer outside of the City of Chicago’s boundaries). Finally, employers must still comply with the other requirements in the Ordinance related to the administration of general paid leave and paid sick leave.

NOTICE AND POSTING

Similar to the current Chicago paid sick leave ordinance, a covered employer must post in a conspicuous place a notice advising covered employees of their right to paid time off. The Ordinance also sets the following requirements:

  1. The employer must provide the same notice to the covered employee with the first paycheck issued to the employee, as well as on an annual basis with a paycheck issued within 30 days of 1 July.
  2. In every pay stub or wage statement to the covered employee, the employer must provide a written notification stating the updated amount of paid leave and paid sick leave available to the employee.
  3. The employer must notify employees at least five calendar days before any changes to the employer’s paid time off policy are made.
  4. The employer must provide employees with a 14-day written notice of changes to its paid time off policies that affect the employees’ final wages.
  5. The employer must notify the covered employee in writing that the employee may request payout of their accrued, unused paid leave time when the employee has not been offered a work assignment for 60 days.

PENALTIES FOR VIOLATION, DAMAGES, AND PRIVATE CAUSE OF ACTION

Any employer who violates the Ordinance may be subject to fines between US$1,000 and US$3,000 for each separate offense. If the employer violates the notice requirements, then the employer may be fined US$500 for the first violation and US$1,000 for any subsequent violation. Each day a violation occurs constitutes a separate and distinct offense.

Further, an employer who violates the Ordinance may be liable to the affected employee for damages equal to three times the full amount of any leave denied or lost by reason of the violation, plus interest, costs, and reasonable attorney’s fees paid by the employer to the covered employee. The Ordinance also provides for a private right of action, which is available to covered employees on 31 December 2023 for violations related to paid sick leave and 1 January 2025 for violations related to general paid leave.

Chicago employers should review their current paid time off policies and payroll systems for compliance and should consider consulting their labor and employment attorneys for assistance in developing a policy that meets the requirements of the Ordinance. The lawyers of our Labor, Employment, and Workplace Safety practice regularly counsel clients on a wide variety of issues related to paid leave policies and are well positioned to provide guidance and assistance to clients on this significant development in Illinois.

FOOTNOTES

1 Chi., Ill., Mun. C. Chi. § 6-130 (2023).

2 Chi, Ill., Mun. C. Chi. § 6-105 (2023).

3 Paid Leave for All Workers Act, Pub. Act No. 102-1143 (Jan. 1, 2024).

4 See Sang-yul Lee, et al., Illinois Guarantees One Week of Paid Leave for All Workers, K&L Gates (Mar. 15, 2023), https://www.klgates.com/Illinois-Guarantees-One-Week-of-Paid-Leave-for-All-Workers-3-15-2023. Employers covered by local paid sick leave ordinances, such as the Ordinance, are exempt from PLAWA so long as such municipality has an ordinance in place on January 1, 2024. See 820 ILCS § 192/15(p).

5 A “covered employee” is defined as an Employee who works at least two hours for a Chicago employer in any particular two week period. See Chi., Ill., Mun. C. Chi. § 6-130-010 (2023).

Copyright 2023 K & L Gates
For more news on Chicago Paid Leave Policy, visit the NLR Labor & Employment section.