On Friday, Governor Newsom signed SB 95, which requires California employers with 25 or more employees to provide employees with a brand new bank of supplemental paid sick leave for COVID-related reasons (SPSL), including to employees seeking vaccination appointments or recovering from vaccination side-effects. The law requires employers to provide the SPSL to employees retroactively back to January 1, 2021.
California’s new mandate is unfunded, placing all of the burden on employers. However, in a bit of good news, the recently enacted $1.9 trillion American Rescue Plan of 2021 (ARPA) extended the federal payroll tax credits originally put in place by the Families First Coronavirus Response Act (FFCRA) through September 30, 2021. This means that, in many cases, California-mandated SPSL provided by employers with fewer than 500 employees will qualify for federal payroll tax credits. However, the rules regarding tax credits are complex – employers should consult their tax professionals to see if the credits may apply.
The new SPSL law goes into March 29, 2021, so employers have little time to provide employees with notice of their rights under the law, ensure compliant policies and practices, and work with their payroll providers to ensure that their paystubs include the necessary new information.
What does SB 95 require?
SB 95, which adds section 248.2 and 248.3 to the California Labor Code, requires employers with 25 or more employees to provide SPSL for COVID-related reasons (listed below). This entitlement is over and above employees’ regular paid sick leave, PTO, or vacation leave banks. SPSL must be available for immediate use by the employee, upon oral or written request. An employee may determine how many hours of SPSL to use, up to the total number of hours to which the employee is entitled.
How much leave are employees entitled to?
Full-time employees are entitled to 80 hours of SPSL. Part-time employees who have a normal weekly schedule are entitled to SPSL based on the total number of hours the employee is normally scheduled to work over two weeks. Variable hour employees are entitled to SPSL based on an average hours calculation defined in the new law.
Employers cannot require the employee to use any other paid or unpaid leave, paid time off, or vacation time provided before the employee uses SPSL or in lieu of SPSL. The law clarifies that SPSL and leave provided under the Cal/OSHA emergency standards may run concurrently.
How will employees know about SPSL and how much leave they have available?
Each employee’s SPSL balance must be listed on the employee’s wage statement or a separate writing provided with the employee’s pay. The law provides only a very short grace period on implementing the pay stub requirement: employers have until the next full pay period after March 29, 2021, which is the effective date of the new law.
For variable hour employees, the employer may prepare an initial calculation of SPSL available and indicate “(variable)” next to that calculation. However, the employer must provide an updated calculation when a variable hour employee seeks to use SPSL or requests the calculation.
The employer must also post a notice to employees of their SPSL rights. The California Labor Commissioner will provide a model notice sometime this week. Notices may be posted electronically for employees who do not frequent the workplace.
What can SPSL be used for?
Employees may use SPSL if they are unable to work or telework for any of the following reasons:
- the employee is under a COVID-19 quarantine or isolation period based on a governmental order or guidelines;
- the employee is under self-quarantine for COVID-19 concerns based on advice from a health care provider;
- the employee is receiving a COVID-19 vaccine;
- the employee is experiencing COVID-19 vaccine side-effects;
- the employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
- the employee is caring for a family member who is subject to an order or guidelines described in subparagraph (1) or who has been advised to self-quarantine, as described in subparagraph (2);
- the employee is caring for a child whose school or place of care is closed or otherwise unavailable for reasons related to COVID-19 on the premises.
How much are employees paid for SPSL?
As is the case with regular California paid sick leave, nonexempt employees must be paid SPSL at the employee’s “regular rate of pay” (a term of art that includes all forms of remuneration the employee receives such as shift differentials and non-discretionary bonuses) or via a calculation made by dividing the covered employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.
Exempt employees’ SPSL should be paid in the same manner as the employer calculates wages for other forms of paid leave time.
However, employers are not required to pay more than $511 per day or $5,110 in the aggregate to an employee for SPSL unless federal legislation is enacted that increases the caps included in the FFCRA, in which case the new federal dollar amount caps would apply.
What is the practical effect of the law applying retroactively to January 1, 2021?
As noted above, SB 95 applies retroactively to January 1, 2021. This presents a significant practical challenge (and cost) for employers.
For any time an employee took off between January 1, 2021 and March 29, 2021 for a qualifying reason under the new law (see above):
- unless the employee has already received compensation in an amount equal to or greater than the amount of compensation required by the SPSL law, then upon the oral or written request of the employee, the employer must provide the employee with a retroactive payment that provides for such compensation;
- this retroactive payment must be paid on or before the payday for the next full pay period after the oral or written request of the employee; and
- the retroactive payment must be reflected on the employee’s wage statement as retroactive SPSL pay.
The law does not directly address what happens if the employee used “regular” paid sick leave, PTO, vacation leave, or unpaid leave after January 1, 2021, but we expect employees will request that their leave banks be credited and replenished for any such time previously debited. Employers should have internal processes/forms ready to process such requests.
When does the new SPSL leave expire?
This new law is in effect through September 30, 2021, except that an employee taking SPSL at the time of the expiration must be permitted to take the full amount of SPSL to which the employee otherwise would have been entitled to under the new law. For example, if an employee starts SPSL on September 30, 2021, she may continue it into October to complete her leave.
Anything else I should know about the new SPSL law?
The new SPSL incorporates many of the provisions of California’s regular paid sick leave laws. For example, the recordkeeping, wage statement, pay calculation, and anti-interference/discrimination/retaliation provisions all apply to SPSL.
In addition, because SPSL is codified in the Labor Code, violations of the SPSL law may be the basis for a Private Attorneys General Act of 2004 (PAGA) representative action.
How does the new federal American Rescue Plan affect implementation of the SPSL?
The federal mandate for employers with fewer than 500 employees (“small employers”) to provide FFCRA leave expired on December 31, 2020. However, shortly before its expiration, Congress extended the federal payroll tax credits for small employers who continued to provide leave based on FFCRA eligibility requirements and in accordance with FFCRA rules, through March 31, 2021. The ARPA has both extended the FFCRA payroll tax credits through September 30, 2021, and expanded the payroll tax credit eligibility to leaves taken for additional reasons covered by SB 95 (e.g., vaccination-related qualifying reasons). This means that small California employers may be entitled to claim federal payroll tax credits to cover most SPSL provided to their employees.
Navigating the tax credits issue is complicated because the federal ARPA and California’s SPSL are not exactly aligned, eligibility for federal payroll tax credits is limited by a number of factors including company size and leave plans offered, and the tax credits will not necessarily cover 100% of the cost of SPSL provided to employees.