This is an update to the previous article about the new California Sick Pay Leave Act and the implementation in Datatech Payroll software. We have some updates in the programming options and best practices to meet the requirements of the legislation.
Our disclaimer regarding the information in this article, manuals, help files and software:
- Nothing should be interpreted as or relied on as legal advice.
- Consult a qualified attorney about any matter of legal significance to you.
We also strongly recommend the following resources to help with your sick pay implementation:
- https://www.dir.ca.gov/dlse/Paid_Sick_Leave.htm (Frequently Asked Questions)
- California Chamber of Commerce for webinar, employee handbooks, help developing a written sick pay policy
The information in the original article is repeated here, and updated for any changes we have made, so that you have everything in one place. Please keep in mind that we are not a resource for answers to your questions about the law. We can only give you information on how our software will work.
Starting July 1st, 2015, a new sick pay leave act goes into effect for California. In order to help our customers comply with the new requirements, we have decided to make some enhancements within our payroll module. Programming is currently in progress and more details will come as options are being implemented.
This information is provided to answer questions about how Datatech programs will help you to handle the new sick pay leave laws. Specific questions about how your business should develop and implement sick pay policy should be directed to your legal counsel.
- Employers will be able to set up multiple sick pay plans with different rates and rules. A sick pay plan will be assigned to each employee who qualifies.
- The new sick pay option will support both accrual and lump sum methods.
- In the sick pay accrual rules, two different caps will be set. You will set a maximum number of hours to accrue and a maximum number of hours available to be used within a year. Any unused hours accrued will carry over to the next year up to the maximum accrual cap. Both the accrual cap and the sick pay use cap must be explained in your written sick pay policy. For each sick pay plan that you define, you can set these limits higher than the statutory minimums, if you want to.
- We will not be supporting a company-wide plan year. Instead, the plan year, or employee anniversary, will depend on when the employee was hired. Please see information below on the Plan Year for further information.
- Our original article may have given the impression that for employees in multiple states, you can have different sick pay methods for each state. However, an employee can only have one sick pay plan. That plan can be set up so that it accrues sick pay for California only, or all states that the employee works in (at the California rate). As mentioned in that article, you may need to consult with legal counsel on how to calculate sick pay for employees working in both California and other states.
- We will be adding a tool to initially assign a plan to current employees so that you do not need to do this one by one. You can also elect to assign a plan to inactive employees, with anniversary date, so that when you rehire, the plan will be in place.
Our original article stated, “we are not planning on supporting the option to base the year on individual employment dates.” It appeared, at the time, that this would be a very complicated process to maintain a different plan year for each employee.
However, having individual anniversary dates appears to be the best way to do this. The Labor Commissioner’s FAQ states:
Because paid sick leave accrues beginning July 1, 2015 or the first day of employment if hired after July 1, 2015, the 12 month period will vary by hire date for those employers hired after July 1, 2015. Therefore, the measurement will most likely be tracked by the employee’s anniversary date.”
Therefore, we have designed the sick pay system to track the employee’s anniversary date as the basis for the year to year calculations, and to automatically handle any processing and roll-over when the employee reaches their anniversary date.
For instance, with the lump sum method, on July 1, 2015, a current employee would receive 24 hours of sick pay. If still employed on July 1, 2016, as his next check is being processed, the program would automatically discard any unused sick pay, then credit the employee with another 24 hours for the next year, and change the anniversary date to July 1, 2016.
With the accrual method, this same employee would begin accruing sick pay on July 1, 2015. The program will accrue and track the total sick pay (up to the annual accrual limit), as well as the total sick pay paid. When July 1, 2016 is reached, the program will automatically carry over any unused sick pay to the next year, zero the year to date accrued and paid, and change the anniversary date to July 1, 2016.
Whether lump sum or accrual, if an employee begins employment at a later date than July 1, 2015, say August 1, 2015, this will become his anniversary date, and the program will automatically handle the roll-over to the new year on August 1, 2016, assuming he is still employed.
If an employee is laid off, then returns within one year, the anniversary date will remain the same, and the sick pay he accrued will remain, and be available for the employee’s use (assuming the 90 day employment has been reached).
If an employee is laid off and returns after one year, the program will use his new employment start date as the anniversary date, discard any prior unused sick pay, and calculate a new 90 day employment waiting period before he sick pay is available. The law is unclear on the 90 day waiting period when re-hired after one year, but since the employee is losing any prior sick pay, it appears he can be treated as a new hire.
Eligibility Periods/Data Entry (Revised)
- We will have an eligibility date field in the employee file (referred to as Date Available). This will be for the 90 day employment waiting period before sick pay can be taken.
1. When a new employee is hired, the Date Available will be calculated automatically, based on the waiting period you set up in the sick pay plan (but no more than 90 days).
2. When an employee is rehired in less than a year from layoff, the program will check to see if they have fulfilled the 90 day employment within the last year, and if not, will calculate a new Date Available.
3. When an employee is rehired after one year, the program will use the new hire date as the Anniversary Date, and will calculate a new Date Available (Anniversary Date + 90 days).
- The program will not allow sick pay to be entered on a check if the employee has not reached the eligibility date. (batch payroll entry). If you are sending sick pay entries from a separate time clock or data collection system, there will be a warning when creating checks. It will be the responsibility of the user to edit these sick pay entries.
- We will not be tracking the 30 day California employment period since the accrual needs to start from day one of employment and the 90 day employment period will cover beyond that 30 days.
Sick Pay Limits, Hours Versus Days
All accruals of sick pay in our software are in hours.
The legislation allows you to cap accruals at 48 hours or 6 days, and to cap sick pay payable to the employee in any one year to 24 hours or 3 days. This does not mean that you, as the employer, can decide which limit, hours or days, to use. The Labor Commissioner is interpreting this to mean you must use whichever limit favors the employee.
For instance, a part time employee works 6 hours per day. Would the amount of sick pay they can use be 18 hours (3 days @ 6 hours) or 24 hours? The Labor Commission says 24 hours, meaning they will actually get 4 days of sick pay.
How about an employee that works 10 hours per day, common in agriculture? In this case, they would be eligible, not for the hour limit of 24, but 3 days at 10 hours per day, 30 hours.
How will the software handle this? In the first case, the part time employee, the standard sick pay plan of 24 hours will work just fine, the same plan you would use for full time (40 hour) employees, as well as salaried.
However, in the second case, where employees are working 10 hours per day, you would need to set up a separate sick pay plan that they would be assigned to, which would have a 30 hour payment limit (and a 60 hour accrual limit).
The sick pay plan definition in our software includes the number of hours to use for accrual of sick pay for salaried employees, which in most cases will be 40 hours. However, if you have salaried employees that regularly work a different number of hours per week, you can set up a sick pay plan definition with the hours they work, and modify the accrual and available sick pay hours to match.
For instance, an employee that worked 10 hours per day, 6 days per week, would have the default salary hours set to 60, the maximum accrual to 60, and the maximum sick pay per year to 30 (assuming your written plan included those limits).
Sick Pay Hourly Rate For Piecework Employees
Currently, the law stipulates that for piecework employees, the rate of pay for any hourly sick pay must be calculated at the employee’s average hourly rate over the last 90 days. Assembly Bill 304 is currently in the amendment process and if passed will change the method to the current week’s regular rate of pay. This would be the same method as used for overtime calculation when there is piecework or multiple pay rates within a pay period.
Either way, we plan to have a method for calculating the employee’s average rate of pay, for whatever period you need to use, when the employee is paid piecework. Obviously, if we need to average 90 days of pay, there may be wait while the program does this.
Best Practices Using Datatech Payroll Software
In many cases, features that we have incorporated into our software are not being used by all of our customers. Here are a couple of procedures that may make the sick pay implementation smoother.
- Assign employees to Departments. If you are going to use different sick pay plans for different classes of employees, you can assign the sick pay plan by department. Otherwise, you may have a lot of manual editing to do. It is important that the departments you use are meaningful when it comes to assigning a sick pay plan.
- We have incorporated the ability to review and update sick pay information for a rehire when you use the Rehire button. If you are not currently using the Terminate and Rehire options, you may want to consider implementing these processes.
- If you don’t use the Rehire option, the program will need to check eligibility for returning employees when a check is entered in batch payroll, or created from daily payroll.
Labor Contractor Billing
From discussions with several labor contractors, there is a general consensus that the labor costs for sick pay would be passed on to the grower in one of three ways:
- Increase commission rate
- Add a separate percentage surcharge that would be itemized separately on the invoice
- Bill the grower that the employee would have worked for when the sick leave was taken
The Datatech Labor Contractor software will handle any one of these methods with the current features, so at this time we are not adding any other billing options for sick pay.
Frequently Asked Questions
Q: Can I start setting up the sick pay accrual rate, or lump sum method in the employee file at this time?
A: No. The current method will not be used. Wait for the software update, which will automate this process and have the correct entries for the California sick pay program.
Q: Why does the law require accruing sick pay to 48 hours, when you can limit the amount paid in any one year to 24 hours?
A: By requiring the accrual to 48 hours, then mandating that any unused sick pay roll over to the next year, the employee is provided with up to 24 hours of sick pay that are available on the first day of the new year, regardless of what the current year accrual happens to be.
Q: Why doesn’t the unused sick pay under the lump sum method roll over to the new year?
A: It is not necessary, since on the first day of the new year you are giving the employee a lump sum of 24 hours to use for that year. With the lump sum method, the employee always has sick pay available on the first day of the new year.
The goal of the legislation is that regardless of the method, after one year the employee has sick pay available on the first day of his next year.
Q: When will the update with the new sick pay options be ready.
A: It will be released on Tuesday, June 16, 2015
Q: How is the 90 day waiting period determined for rehired employees?
A: When an employee is rehired, or there is a time gap in the employee’s checks, the program will check to see if the employee has worked in the last year, using the Date Last Worked entry in the employee file. If it is more than one year, all prior accruals are discarded and the program will calculate a new 90 day waiting period as if this was a new employee.
If the employee has worked within the last year, the program will calculate the time worked, from the starting payroll date of the first check to the ending date of the last check. The number of days will then be used to calculate when the sick pay will be available to the employee. ( 90 minus prior days worked = days to complete waiting period. New starting date plus days to complete waiting period = new date available.)
If there are gaps in the employee’s prior employment during the year, the program will eliminate those days from the calculation. By default, a gap in employment of 30 days or more will be eliminated. If you want to shorten this time gap, you can do so in the payroll setup screen. We recommend using a time gap of no less than 10 days, but there may be some legal questions about this calculation. What time period not working due to lack of work constitutes an interruption in continuous employment?