On January 10, 2023, the Illinois Legislature passed the “Paid Leave for All Workers Act,” (PLAW Act) effectively guaranteeing that as of January 1, 2024, with a few exceptions, “an employee who works in Illinois” will be eligible to earn “up to a minimum 40 hours of paid leave” in a 12-month period. With the new law, Illinois will join Maine and Nevada in allowing eligible employees to take time provided or earned under the Act for “any reason.” Governor JB Pritzker is expected to sign the bill into law in the near future.
As discussed below, in some cases this law may not require employers to provide additional leave beyond what they already provide. Even where no additional leave is required, some employers—including some employers based outside of Illinois—may need to follow accrual and carry-over rules in the PLAW Act. Indeed, there are several aspects of this law that are potentially subject to differing interpretations and/or appear to be inconsistent with other laws. For now, until the Illinois Department of Labor issues regulations or other guidance, employers should review current leave policies, assess the need for any changes to those policies in time to provide notices as required under state laws, and prepare to implement the PLAW Act’s requirements on or before January 1, 2024.
Does this law apply to my company?
Under the definition of “employer”—which borrows heavily from the Illinois Wage Payment and Collection Act’s definition—most companies that have employees who work in the State of Illinois will be subject to the requirements of the PLAW Act. Under the PLAW Act, “‘Employer’ has the same application and meaning as provided in Sections 1 and 2 of the [Wage Payment and Collection Act],” with some exceptions. In practical effect, after accounting for these Wage Payment and Collection Act sections and the PLAW Act’s carve outs, the PLAW Act applies to all individuals and public and private entities that employ at least one employee in the state of Illinois, except:
- Federal government employers;
- School districts organized under the Illinois School Code; and
- Park districts organized under the Illinois Park District Code;
Importantly, the PLAW Act also exempts from its requirements employers covered by a “municipal or county ordinance that is in effect on the effective date of this act that requires employers to give any form of paid leave to their employees, including paid sick leave or paid leave.” Thus, it is fairly clear that employers that are already providing paid sick leave to employees under the Chicago or Cook County paid sick leave ordinances will not be required to provide an additional 40 hours of paid time off and that employers in municipalities that have opted out of the Cook County ordinance will need to begin providing paid time off under the new state law. Further, based on the language of the PLAW Act, employers already covered by the Chicago or Cook County paid sick leave ordinances will not be required to provide “general” paid leave and instead will be able to limit availability of leave to the sick leave reasons listed in the ordinances.
Does this apply to my company’s employees?
As much as one might think that answering the first question—whether the new law applies to one’s company—would also answer this question, it’s not quite that simple.
The PLAW Act also uses the Wage Payment and Collection Act’s definition of “employee” as a starting point for defining workers entitled to leave. Sections 1 and 2 of the Wage Payment and Collection Act, define the term “employee” to mean:
- “[A]ny individual permitted to work by an employer in an occupation”; and
- “Employees in this State, including employees of units of local government and school districts, but excepting employees of the State or Federal governments.”
The Wage Payment and Collection Act—and by extension, the PLAW Act—explicitly excludes from coverage individuals who meet the definition of an independent contractor under Illinois law. Additionally, the PLAW Act modifies the Wage Payment and Collection Act’s broad definition of employees in several notable ways:
- Notwithstanding anything to the contrary in the Wage Payment and Collection Act, domestic workers are included as “employees” under the PLAW Act;
- Individuals who meet the definition of “employee” under the federal Railroad Unemployment Insurance Act or the Railway Labor Act are not “employees” under the PLAW Act;
- “College or university” students who work part time and on a temporary basis for the college at which they are enrolled are not “employees” of that college under the PLAW Act; and
- Individuals who work for an “institution of higher learning” for less than two consecutive calendar quarters and who do not have an expectation that they will be rehired by the same institution are not covered by the definition of “employee” under the PLAW Act.
While the PLAW Act utilizes the Wage Payment and Collection Act’s definitions of employer and employee, it is unclear at this time to what extent the Wage Payment and Collection Act’s regulations, which further delineate those terms, may apply to PLAW Act claims as well. The PLAW Act specifies that it applies to “an employee who works in Illinois,” which implies that the law not only applies to in-state employees, but also to employees based outside of Illinois who perform at least 40 hours of work in Illinois in the yearly period. Further, Wage Payment and Collection Act regulations provide that the Department can assert jurisdiction, among other bases, over a claim “if the work is performed outside the State of Illinois, [and] the employer [is] located in Illinois.” If the regulations apply, one could conclude that the PLAW Act applies not only to employees working in Illinois (whether working for an Illinois-based company or not), but also to employees working outside of Illinois for an Illinois-based employer. We anticipate that the Illinois Department of Labor will issue guidance before the law goes into effect next year that will (hopefully) define whether the law mandates paid leave solely for Illinois-based employees; but for now, Illinois employers may want to prepare for the possibility that leave under the PLAW Act will have to be provided to employees located outside of Illinois. Likewise, employers based outside of Illinois but whose employees perform work in Illinois will also need to track their employees’ hours worked in Illinois and provide the appropriate amount of paid leave.
Are bargaining unit employees covered under this law?
The PLAW Act provides that its requirements may be waived in a “bona fide collective bargaining agreement” if the waiver is “set forth explicitly in such agreement in clear and unambiguous terms.” Notably, however, the new law will not change or affect any collective bargaining agreement that is in effect on January 1, 2024. In other words, under the language as written, employers with a unionized workforce will arguably still be required to implement leave requirements—including the accrual or grant, usage, and recordkeeping rules discussed below—even where those may be inconsistent with the terms of a collective bargaining agreement that is in place and may not be set to expire for several years.
The above said, the PLAW Act will not apply to employees covered by collective bargaining agreements with state agency employers, employers within the construction industry, or employers who provide services “nationally and internationally” of delivery, pickup, and transportation of documents, parcels, and freight. (It is unclear whether the “and” was intended to require the employer to engage in both national and international services to be exempt, or if one or the other is sufficient.)
How much paid time off must be provided and when must an employer provide it?
As mentioned above, covered employees are entitled to earn and use a minimum of 40 hours of paid time off during a 12-month period. The paid leave under the PLAW Act accrues at the rate of 1 hour for every 40 hours worked up to a minimum of 40 hours. Exempt employees are presumed to work 40 hours in each work week unless their regular work week is less than 40 hours.
Employees begin accruing leave at the beginning of employment or the effective date of the PLAW Act, whichever is later. However, an employer may elect to provide the full 40 hours of leave at the beginning of the applicable 12-month period as a block grant. Regardless of whether the time accrues as the employee works or is granted at the outset of the applicable period, employees are eligible to begin taking leave 90 days following the commencement of their employment or 90 days after the law is effective, whichever is later.
The employer may designate the consecutive 12-month period, which must be communicated to employees in writing at the time of hire. Thus, the employer can designate a calendar or fiscal year period or a period based on an anniversary of employment. If an employer makes changes to the designated 12-month period, the employer must provide documentation to the employee that includes the balance of hours work, paid leave accrued and taken, and the remaining leave balance.
How can the paid time off provided under this law be used?
There is little doubt that when this law becomes effective, employees of employers that are not covered by either the Chicago or the Cook County paid sick leave ordinances will be able to take up to 40 hours of paid leave for “any reason of the employee’s choosing.” What is somewhat less clear is whether employers currently providing paid sick leave under either ordinance—which may only be used for reasons specified under those ordinances, i.e. sick leave reasons—will need to begin allowing employees to use the paid leave under those ordinances for any purpose. Whether intended or not, the manner in which the PLAW Act is currently written provides that employers covered by Chicago and Cook County paid sick leave ordinances need only provide leave for the enumerated sick leave reasons, not for all purposes. We anticipate that guidance will issue from the Illinois Department of Labor as January 1, 2024 approaches, which we hope will include clarification on this point, but until then, employers should at least anticipate the possibility that the Department of Labor may construe the law, despite how it currently reads, per the stated legislative intent “in favor of providing workers with the greatest amount of paid time off from work and employment security.” Arguably, such a construction may require employers to allow time earned or granted under paid sick leave laws to be used for any purpose, despite the actual language in the substantive portion of the law.
Employees can request to take paid leave either orally, in writing, or in accordance with an employer’s reasonable paid leave policy; but employees need not provide, and employers may not require, documentation or certification regarding the reason for taking time off under the PLAW Act. That said, a reasonable policy may include a requirement that an employee provide seven calendar days’ notice if the leave is foreseeable, or, if not foreseeable, as much notice as is practicable after employee is aware of a need for leave. Employers may set a “reasonable” minimum time increment for use, which is defined as not exceeding two hours per day. Employers are not allowed to require the employee to find coverage from another employee to take paid leave.
If the employer provides other paid leave besides the paid time off under the PLAW Act and accounts for the leave separately from the mandated leave, the employee may choose the “bank” of leave from which they wish to take time off. Because of the rules on the payout of unused time off and carryover, as discussed in further detail below, employers may want to consider tracking and otherwise administering the 40 hours of paid time off separately from other paid leave, including paid time off that may be used for any purpose that is in excess of 40 hours.
Must an employer allow unused leave to be carried over from year to year?
Employers who provide the minimum number of hours of paid leave to an employee on the first day of employment or the first day of the consecutive 12-month period (i.e. who frontload the time in a block grant) are not required to carry over paid leave when the new year begins and can require the employee to forfeit the unused time. If employees accrue benefit time as they work, however, employees may carry over unused time. Even though the Act requires carryover of time if employees earn as they work, the Act does not require the employer to allow the employee to use more than 40 hours in the designated 12-month period. Although the law is silent on the maximum amount of accrual of paid leave in the 12-month period, which may be clarified by Department of Labor regulations, the law allows for the limitation on usage to 40 hours per year.
Do employers have to pay out unused paid time off when an employee leaves?
Additionally, employers will not be required to pay out any leave time that accrues or is granted but not used when an employee is separated from their employment unless the time received or earned under the PLAW Act is placed in a paid time off bank or employee vacation account. In other words, if an employer that provides other types of leave or more leave than the minimum required under the PLAW Act aggregates all paid leave into a single bank of paid time off, all of the unused leave in that bank will have to be paid out upon the employee’s termination. On the other hand, if the employer keeps PLAW-required leave separate from other leave (including general paid time off in excess of 40 hours), the employer will not have to pay out any unused PLAW-required leave. Thus, leave required under this new Illinois law is essentially treated the same as a separate bank of “paid sick leave” has been treated under the Wage Payment and Collection Act.
If an employee’s employment is terminated for any reason and the employee has unused paid leave under the new law and is rehired within 12 months, the employer must reinstate the prior unused paid leave and allow it to be immediately used at the beginning of re-employment. If the employee is promoted, transferred, or moved to a new division or location but is still employed by the same employer, the employee must retain any previously accrued time.
Are there any recordkeeping or notice requirements?
Of course there are. Employers are required to preserve records documenting hours worked, leave accrued and taken, and the remaining leave time balance for three years and must allow the Department of Labor access to the records.
Employers must also post a summary of the Act’s requirements in a conspicuous place where notices are customarily posted. Employers will also be required to provide a written notice summarizing the requirements of the PLAW Act and information about how to file a charge with the Illinois Department of Labor. The notice—which will be prepared by the Illinois Department of Labor—will have to be given to employees upon commencement of employment or 90 days after the PLAW Act becomes effective, whichever is sooner, and may be provided as a standalone document or included in an employee handbook.
What happens if an employer does not comply?
The Illinois Department of Labor has responsibility for administering and enforcing the PLAW Act. Employees who believe their employer has violated the PLAW Act will be able to file a complaint with the Department of Labor. The limitations period for such a filing is three years from the date of the alleged violation. If, after an investigation, the Illinois Department of Labor finds cause to believe that the law has been violated, the matter will be referred to an Administrative Law Judge for a formal hearing.
Employers who fail to abide by the PLAW Act—including the law’s recordkeeping requirements—may be liable to affected employees for up to $1000 in civil penalties as well as damages in the form of any actual underpayment, compensatory damages, equitable relief as may be appropriate, reasonable attorneys’ fees, witness fees, and other costs of maintaining an action against the employer. Violations will also subject employers to a penalty of $2,500 for each separate violation of the Act to be paid into a “Paid Leave for All Workers Fund,” that will be used for purposes of enforcing the PLAW Act.
Further, other than clear and unambiguous waivers in a collective bargaining agreement, individual employees may not waive their rights under the PLAW Act, and any agreement by an employee purporting to waive such rights will be considered void. The law also includes a nonretaliation provision that makes it unlawful for an employer to threaten to take or to take adverse action against an employee for exercising rights under the PLAW Act. But it’s worth noting that among the legislative findings and legislative intent in the opening sections of the law is a finding that “it is in the public policy interests of the State for all Illinoisans to have some paid leave from work,” arguably opening the door for an employee—who cannot otherwise bring a lawsuit for violation of the PLAW Act—to file a claim in state court for common law retaliatory discharge.
Takeaways
While the law will not take effect until January 1, 2024, employers should prepare this year by determining if they will be covered by the law and whether their current leave policies need updating for implementation next year. If you have any questions regarding this Alert, please contact the authors, Chicago partners Kimberly Ross, Kross@fordharrison.com, and Becky Kalas, Bkalas@fordharrison.com, or Chicago associate Doug Nolan, Dnolan@fordharrison.com. Of course, you can also contact the FordHarrison attorney with whom you usually work.