Executive Summary: In response to the State of Illinois enacting the Paid Leave for All Workers Act (“PLAW Act”), which requires 40 hours of paid leave to be provided to employees that can be used for any reason, but exempts Chicago and Cook County because they already had paid sick leave ordinances, the City of Chicago enacted, on November 9, 2023, a new Chicago Paid Leave and Paid Sick and Safe Leave Ordinance (the “Ordinance” or “CPLO”). This Ordinance went through many iterations over a short period of time and was passed with very little notice or time for objection or oversight. As a result, on December 13, 2023, the Chicago City Council voted to delay implementation of the ordinance to July 1, 2024, presumably to have time to enact rules for implementation, to give employers a chance to update their policies, and possibly (hopefully) time to make some adjustments to the ordinance to clear up some questions that will be discussed below. Until then, the existing paid sick leave ordinance will be in effect, requiring employers to provide up to 40 hours of paid sick leave.
Covered Employees
The CPLO requires employers to provide “Covered Employees” with various types of paid leave, which will be discussed below. The term “Covered Employees” under the CPLO includes any employee who, within any 120-day period, performs at least 80 hours of work for an employer while physically present within the geographic boundaries of the City. Thus, Covered Employees include those who spend any time for which they are compensated while working in or traveling in the City. This would include employees who make deliveries and sales calls or perform other travel related to their jobs while in Chicago. It would not include uncompensated commuting time in the City. Thus, the CPLO also applies to companies that are not physically located in Chicago, but who have employees who perform at least 80 hours of work in Chicago within any 120-day period.
In a glaring example of inconsistency, the Ordinance makes many references to the concept of a Covered Employee ceasing to meet the definition of a Covered Employee as a result of transferal outside of the geographic boundaries of the City. This was in the original version of the Ordinance, before the definition of a Covered Employee was changed. The amendment to the ordinance provides that once an employee meets the definition of a Covered Employee, the employee remains a Covered Employee for the rest of the time the employee works for the employer. It is therefore unclear whether the multitude of references to an employee no longer being a Covered Employee will also be removed from future versions of the Ordinance.
“Covered Employees” also include all “domestic workers,” regardless of whether they work as employees, independent contractors, sole proprietors, or partnerships. Domestic workers are defined as those whose primary duties include housekeeping, house cleaning, home management, nanny services, caregiving, personal care or home health services for elderly and infirm individuals, laundering, cooking and companion services, chauffeuring, and other household services to members of households.
Paid Leave and Employer Size
The types of paid leave under the CPLO include paid leave that can be used for any reason (“Paid Leave”), and paid sick leave, that can only be used for sick leave reasons (“Paid Sick Leave”). Paid Sick Leave can be used for what have become the “customary” reasons, including for the employee’s or employee’s family’s preventative or medical care, if the employee or employee’s family member (with a very broad definition) is a victim of a crime of violence, business closure due to public health emergency, etc. The size of the employer is significant when it comes to payout of accrued Paid Leave upon termination, which will be discussed below. Employers with covered employees in Chicago are broken down into Small, Medium, and everyone else. A Small Employer is one who has 50 or fewer Covered Employees. A “Medium Employer” is one who has between 51 and 100 Covered Employees. Though not defined as a “large” employer, every other employer would be those with more than 100 Covered Employees. Perhaps a saving grace to smaller employers, particularly those outside of Chicago who happen to have employees who perform work in Chicago, is that the definition refers to the number of Covered Employees, not just total employees. Thus, an employer outside of Chicago who has 50 or fewer employees who perform work in Chicago may be a Small Employer for purposes of Chicago paid leave, even if they are otherwise a large employer. As will be discussed, however, employers will need to track the time and location of the work of all employees, not just Covered Employees, to ensure that a non-covered employee does not become a Covered Employee.
Earning Paid Leave and Paid Sick Leave
Employers are required to provide Paid Leave and Paid Sick Leave to all Covered Employees in amounts discussed below. If an employer’s policy already provides paid leave in a manner and amount that meets the minimum requirements, the employer need not provide any additional leave under the Ordinance. Starting on July 1, 2024, or on the first day of a Covered Employee’s employment, paid leave under the ordinance must begin to accrue. For every 35 hours worked, the Covered Employee will accrue 1 hour of Paid Leave and 1 hour of Paid Sick Leave. The total leave that can be accrued is capped at 40 hours of Paid Leave and 40 hours of Paid Sick Leave in a 12-month period (unless the employer chooses a higher amount). If an employer is already providing more than the minimum required leave, the employer will be allowed to provide the leave on a monthly basis rather than accruing hour by hour. Overtime-exempt employees are presumed to work 40 hours per week unless their normal workweek is shorter, in which case paid time off shall accrue based on the normal work week. Payment for paid leave must be compensated at the same rate and with the same benefits that the Covered Employee regularly earns during hours worked and must be calculated by dividing the total wages (not including overtime or premium pay, tips, or commissions) earned in the prior 90 days by the number of hours worked. (Commission-only employees must receive pay based on base wage or the applicable minimum wage, whichever is greater.)
Use of Paid Leave and Paid Sick Leave
Employers must allow Covered Employees to begin using accrued Paid Sick Leave no later than the 30th day of employment and must allow the use of Paid Leave no later than the 90th day of employment. Employees may choose whether to use Paid Sick Leave or Paid Leave. Employers may set a reasonable minimum increment for use of either form of paid leave, but no more than 4-hour increments for Paid Leave and no more than 2 hours for Paid Sick Leave.
Carryover v. Frontloading
Employers may choose whether to frontload paid leave or allow for carryover to the next 12-month accrual period.
Carryover: If the employer chooses the carryover method, at the end of each 12-month accrual period, Covered Employees will be allowed to carry over to the following 12-month period up to 16 hours of Paid Leave and 80 hours of Paid Sick Leave. Employers do not need to pay out any unused leave that did not carry over. If the employer denied the employee the use of leave in a manner that prohibited the employee from meaningfully having access to such paid time off, then the employer must allow carryover of the additional amount that the employee did not have reasonable time to use.
Frontloading: If the employer chooses the frontloading method, the employer will need to immediately grant Covered Employees 40 hours of Paid Leave or 40 hours of Paid Sick Leave or both on the first day of employment (or the first day of the 12-month accrual period). The Ordinance states that if the employer frontloads Paid Leave, the employer is not required to allow carryover of Paid Leave to the next year. The Ordinance does not specify that an employer may avoid carryover of Paid Sick Leave that has been frontloaded. However, proposed rules for the Ordinance state that if an employer grants 40 hours of Paid Leave no later than 90 days after the start of employment and yearly thereafter, and 40 hours of Paid Sick Leave no later than 30 days after starting employment, then the employer does not need to follow the requirements for accrual or carryover. Hopefully, the City Council will fix this omission in the text of the Ordinance.
Conspicuously absent from both the Ordinance and proposed rules is any discussion of a cap on accrual of Paid Sick Leave banks, or a cap on use of either type of paid leave. Since carryover of Paid Leave is limited to 16 hours, presumably an employee can use up to 56 hours of Paid Leave in a year, the 16 carried over and the 40 earned the next year. With the carryover of up to 80 hours of Paid Sick Leave, however, this could potentially mean an employee has 120 hours of Paid Sick Leave to use, 80 of which then can keep carrying over to the next year if unused. If the City does not place a cap on use like the state did under the PLAW Act (capping use at 40 hours in a year), then it will be to employers’ benefit to use the frontloading method to avoid the accrual of very large amounts of paid leave with no limit on taking it. Otherwise, employees may have as much as 4.4 weeks of available leave in a year (176 hours) to use. It will be particularly important to limit the amount of leave available to use under the Ordinance given the very significant potential for abuse, as discussed below.
Notice of Taking Leave
Employers may require Covered Employees to provide up to 7 days (but not more) of notice of the need to take paid time off if the need is reasonably foreseeable. If the need is not reasonably foreseeable, employers may require the employee to give notice as soon as is practicable on the day the employee intends to take paid off, by notifying the employer by phone, email, or “other means.” An employer may not require a Covered Employee to obtain preapproval from the employer prior to using the paid time off. Importantly, the employer is prohibited from using its absence-control policy to count paid time off as an absence that triggers discipline, discharge, demotion, suspension, or any other adverse activity. Further, the employer may not require the employee to provide a reason for or proof of the need for the leave. The only exception is that for use of Paid Sick Leave, if the absence is for more than three consecutive work days, the employer may require certification that the use of the Paid Sick Leave was for proper sick leave reasons. This means that the employee can essentially take a few hours of leave off nearly every day, without notice or warning, and cannot be disciplined for it, and will not have to explain why they took the time. Without the ability to ask for a reason, require notice, or impose any absence-control policies, employers will likely experience significant abuse of the system.
Payout on Termination or When No Longer Covered Employee
Paid Leave: Upon termination from employment (unless stated otherwise in a Collective Bargaining Agreement), or when an employee ceases to be a Covered Employee (which may no longer be relevant since the amendment to the Ordinance), Small Employers (50 or fewer employees) do not need to pay out any unused Paid Leave. Medium Employers (51-100 employees) are required to pay out 16 hours of unused Paid Leave until July 1, 2025, and thereafter, will be required to pay out all unused Paid Leave. Employers with over 100 employees will be required to pay out all unused Paid Leave upon termination of employment (and upon request of an employee who has not received a job assignment for the prior 60 days but who is still an employee). Although vague and not well defined, it appears that if an employer has an unlimited paid leave policy, upon termination from employment, or when an employee ceases to be a Covered Employee, the employer must pay the monetary equivalent of 40 hours of paid time off minus the hours of paid time off used by the Covered Employee in the last 12-month period before the date of separation as part of the final compensation.
Paid Sick Leave: Employers do not need to pay out unused Paid Sick Leave on termination.
Notices and Recordkeeping:
Employers are required to post a notice of the Ordinance in the same place as they post (or distribute) other labor and employment laws. Notices regarding the paid leave ordinance, as well as all other employer notices, must be provided in the employee’s primary language. Employers must also provide each Covered Employee, each time wages are paid, a written notification of an updated amount of Paid Leave and Paid Sick Leave that has accrued and has been used (though employers who credit employees paid leave on a monthly basis because they provide more than the minimum amount of leave may provide the updated notice of available leave on a monthly basis). Employers must keep records regarding paid leave for 5 years. A failure to do so will create a “presumption, rebuttable by clear and convincing evidence,” that the employer violated the Ordinance. Employers must track the hours worked (and location if work is performed inside and outside of Chicago) of all employees, not just Covered Employees.
Enforcement
Employees may bring claims to the City Department of Business Affairs and Consumer Protection. The Ordinance does not provide a statute of limitations but the proposed rules state that complaints must be brought within 3 years. Damages are three times the full amount of any leave denied or lost due to the violation, as well as fines ranging between $1,000 and $3,000 for each separate offense. Posting violations and failure to provide the regular accounting of leave accrual and availability will be $500 for the first violation and $1,000 for any subsequent violation. Each day that a violation continues will constitute a separate and distinct offense. Employees will also have the right to file suit in court, but for the Paid Leave provisions, not until July 1, 2025. Damages in a private cause of action will be up to three times the full amount of any leave denied or lost by reason of the violation plus interest, along with costs and reasonable attorney’s fees. The Ordinance is silent on a statute of limitations for a private cause of action.