A new mandate for employee paid leave will impact most Chicago area employers starting on January 1, 2024. The Paid Leave for All Workers Act (the “Act”) which was signed by Governor Pritzker on March 13, 2023, will give up to 40 hours of paid leave to most employees, who can use it for any reason. The changes included in the legislation are designed to provide workers with a reasonable amount of paid time off while ensuring employment security. There are several provisions that employers should consider in the coming months including employer responsibilities, recordkeeping, posting requirements, and penalties for non-compliance. To help clients, prospects, and others, Selden Fox has provided a summary of the key details below.
Background on Illinois’ New Paid Time Off Law
Workforce development and career training have been priorities for Illinois lawmakers for some time. The Paid Leave for All Workers Act is another tangible way for Illinois to attract and retain top talent.
The Act originally began as Senate Bill 208 in 2021 as an amendment to the Illinois Choice Savings Program Act. It underwent several revisions in both chambers, ranging from removing any reference to a small employer to changes in the number of employees that a covered employer would have.
How the Illinois Paid Leave Act Works
When the Act becomes law, employees can use paid leave for any reason. Employers cannot restrict its use or require documentation or certification. Employers may require a seven-day notice for use of foreseeable leave. In instances of unforeseen need, the notification must be submitted, but employees are not required to find a replacement to cover the missed time.
These are some of the most frequently asked questions about the Act and how employers can more easily prepare for the changes.
What are the employer’s requirements?
Employers will have two options:
- Give employees the full amount of paid leave at the beginning of the year or on the first day of employment, or
- Prorate paid leave throughout the year wherein employees would accrue one hour of leave for every 40 hours worked.
What is the definition of an employee?
Employers can use the definition of employee in the Illinois Wage and Payment Act, which states that an employee is “any individual permitted to work by an employer in an occupation” except for independent contractors. Individuals covered under the federal Railroad Unemployment Insurance Act, or the Railway Labor Act also do not qualify as covered employees. It is important to note that domestic workers, such as nannies and caregivers, would also be considered employees and fall under the Act’s purview.
When can employees use paid leave?
New workers can use paid leave after 90 days on the job or sooner if employers agree to do so. For those that elect to wait until January 1, 2024, to implement the policy, paid leave time will be available 90 days (March 30, 2024) after the law takes effect.
How can the time be used?
Employees can use as much or as little time as needed; however, employers are permitted to set minimum time blocks. For example, a business could require paid leave to be taken in minimum two-hour increments.
Does paid leave roll over or is it a ‘use it or lose it’ policy?
If paid leave is given in a lump sum at the beginning of the year, employers can choose whether to let allow the leave to roll over from one year to the next. If paid leave is accrued, then there must be time allowed in which workers can take it.
How is the paid leave wage rate determined?
Leave is based on the employee’s hourly pay rate. Employees who earn commissions or gratuities on top of a base wage must be compensated at least the applicable minimum wage. If the hourly rate is higher than the local minimum wage, then the higher amount prevails.
Will paid leave be paid out when an employee quits or is otherwise terminated?
No. However, if employers include paid leave in total paid time off, they could be liable to pay out the remaining balance. If an employee returns to the same employer within 12 months, the amount of paid leave they had left over must be restored.
What are the documentation requirements?
Employers must keep records of hours worked, hours of paid leave taken (accrued, if applicable), and the remaining balance. Records must be kept for at least three years. Employees who accrue paid leave can ask to see documentation of how much leave is available at any point during the year. Non-compliance can result in a penalty of $2,500 per violation.
Public notice must also be posted in a prominent area. The Illinois Department of Labor will provide the notice. Failure to follow posting requirements can result in fines ranging from $500 to $1,000.
Are there exemptions to the new law?
Yes. Although the Act broadly applies to most employers, including state and local governments and nonprofits, there are certain exceptions, including:
- Part-time student workers.
- Short-term temp workers at a college or university who work for less than six consecutive months if there’s no expectation of rehire in the next year.
- Construction employees are covered under a collective bargaining agreement.
- The Act specifies that the construction industry includes “snow plowing, snow removal, and refuse collection.”
- Others are covered by a collective bargaining agreement with an employer involved in domestic or international delivery, pickup, transportation, or freight services.
- School or park districts.
- Other employers are already covered under county ordinance with a paid leave or paid sick leave policy.
Can employers be penalized for non-compliance?
Yes. When a business fails to offer the required leave there are consequences. The business may be forced to repay the time plus damages and may be liable for civil penalties. It is important to note, workers have three years from the time of the alleged offense to file a complaint. While no specific details are currently available on the complaint process, it is clear the interpretation of the law will be heavily in favor of employees. For this reason, employers need to carefully follow compliance requirements.
There are significant changes coming to employee leave in Chicago and across Illinois. If you have a question about the information outlined above or need assistance with a tax or accounting issue, Selden Fox can help. For additional information call 630.954.1400 or click here to contact us. We look forward to speaking with you soon.