By: Paige Moricz, PHR
Key Takeaways:
- Effective July 1, 2024, Chicago employers must provide employees with up to 40 hours of general paid leave and up to 40 hours of paid sick leave annually. Employees accrue one hour of each type of leave for every 35 hours worked, with a cap of 40 hours per year.
- Applies to full-time, part-time, and domestic workers performing at least two hours of work in Chicago within any two-week period. Time spent traveling in Chicago is compensated time, including, but not limited to, deliveries, sales calls and travel related to business activity
- Employees can carry over unused paid leave (up to 16 hours) and sick leave (up to 80 hours), and must be allowed to use paid leave by the 90th day of employment and sick leave by the 30th day.
Ordinance Takes Effect July 1, 2024
The July 1, 2024, effective date for the City of Chicago’s new Chicago Paid Leave and Paid Sick and Safe Leave Ordinance has arrived. Enacted by the Chicago City Council in fall 2023, the ordinance establishes several new paid leave requirements for employers whose employees’ work is performed in Chicago, including:
- Requires employers with employees working in Chicago to provide Up to 40 hours of leave usable for any purpose (called paid leave).
- Requires employers with employees working in the geographic boundaries of Chicago to provide Up to 40 hours of leave for illness, injury, or medical appointments (called paid sick leave).
- Covered employees accrue one hour of general paid leave and one hour of paid sick leave for every 35 hours worked, with a total accrual capped at 40 hours in a 12-month period.
The changes for employers with employees in Chicago are significant and may impact existing paid leave, paid sick leave and “unlimited” paid time off policies. Following is a summary of the new ordinance’s requirements.
Who is a Covered Employee?
The ordinance covers any full-time or part-time employee who, in any two-week period, performs at least two hours of work for an employer while physically present in Chicago. Time spent traveling in Chicago is compensated time, including, but not limited to, deliveries, sales calls and travel related to business activity. Domestic workers, regardless of employment classification as an employee or independent contractor, are also covered by the new law.
Accrual
Beginning July 1, 2024 (or on the first calendar day of a covered employee’s employment), covered employees began accruing the following in each successive 12-month period:
- 1 hour of paid leave for every 35 hours worked, up to 40 hours of paid leave in a 12-month period, or all 40 hours can be frontloaded, and
- 1 hour of paid sick leave for every 35 hours worked, up to 40 hours of paid sick leave in a 12-month period.
Covered employees who are exempt from overtime requirements are assumed to work 40 hours per week for accrual purposes, unless a covered employee’s normal work week is under 40 hours, in which case the accrual is based on that normal work week. Leave must accrue only in hourly, and not fractional, increments.
Use of Paid Leave and Paid Sick Leave
A covered employee may use paid leave for any reason. A covered employee may use paid sick leave when:
- The covered employee of their family member is ill, injured, or receiving professional care (which includes preventative care, diagnosis, or treatment for medical, mental or behavioral issues, including substance use disorders);
- A covered employee’s family member is ordered to quarantine, or the covered employee must care for a family member receiving professional care;
- The covered employee or their family member is a victim of domestic violence, a sex offense, or human trafficking;
- The covered employee’s place of business is ordered closed by a public official due to a public health emergency;
- The covered employee needs to care for a family member whose school, class, or place of care has been closed;
- The covered employee obeys an order issued by the mayor, the governor of Illinois, the Chicago Department of Health, or a treating health care provider, requiring the employee to:
- Stay at home to minimize the transmission of a communicable disease;
- Remain at home while sick or experiencing symptoms of a communicable disease;
- Obey a quarantine order issued to the covered employee;
- Obey an isolation order issued to the covered employee.
Carryover
At the end of their 12-month accrual period, covered employees may carry over accrued but unused paid leave as follows:
- Up to 16 hours of paid leave, if frontloaded carryover is not eligible, and
- Up to 80 hours of paid sick leave.
Employers do not need to pay covered employees for any unused, accrued paid leave/paid sick leave lost because it could not be carried over, unless a covered employee did not have “meaningful … access” to use the earned time.
Timing of Use
Employees must be allowed to use accrued paid leave as follows:
- Paid sick leave: no later than their 30th calendar day of employment
- Paid leave: no later than their 90th calendar day of employment
Unless obligated by other laws, a covered employee may choose whether to use paid sick leave or paid leave before using any other available leave.
Advance Notice of Need for Leave
For paid leave, an employer can require reasonable notice, which may not exceed seven days. An employer can also require an employee to obtain reasonable preapproval to ensure the continuity of operations.
If an employee’s need for paid sick leave is reasonably foreseeable, an employer may require up to seven days’ notice before leave is taken. If the leave is not reasonably foreseeable – for instance, if the employee became ill suddenly – the employer may require the employee to give notice as soon as possible by telephone, e-mail or other means. Employers maintain the right to request documentation for use of paid sick leave when the covered employee is absent for more than three consecutive workdays.
Rate of Pay and Continuation of Health Insurance
Paid leave and paid sick leave are compensated at the same rate that the covered employee regularly earns during hours worked. The pay rate for non-exempt covered employees is calculated by dividing the employee’s total wages by their total hours worked in full pay periods of the prior 90 days of employment. Wages, for purposes of this calculation, exclude overtime pay, premium pay, gratuities and commissions, but the rate must be at least the highest applicable minimum wage.
Employers must maintain health insurance coverage for the covered employee (and any covered family members) for the duration of the leave.
Note: Employers must notify covered employees if they will still be responsible for paying the employee’s share of the cost of health care coverage while on paid leave/paid sick leave.
Timing of Payment
Employers must provide payment for paid leave and paid sick leave no later than the next regular payroll period after the paid time off is taken.
No-Fault Attendance Policies
The ordinance prohibits employers from counting the use of paid leave/paid sick leave under an attendance-control policy (such as a no-fault attendance policy).
Payout of Paid Leave at Termination of Employment or Transfer Out of Chicago
Unless otherwise provided in a collective bargaining agreement, when a covered employee’s employment terminates (or when a covered employee is transferred outside of Chicago), the employer must pay the monetary equivalent of all unused, accrued paid leave (but not paid sick leave, which need not be paid out) as part of the employee’s final compensation at the employee’s final rate of pay.
However, a small employer (less than 50 employees) shall not be required to pay out unused paid leave upon termination/transfer. A medium employer (51-100 employees) must pay out unused paid leave up to a maximum of 16 hours until December 31, 2024, at which time they must begin paying out all unused, accrued paid leave.
Existing Leave Policies
An employer whose existing paid leave policies grants covered employees paid leave and paid sick leave “in an amount and a manner that meets or exceeds” the ordinance’s requirements is not required to provide any additional paid leave/paid sick leave. This provision may be subject to a future regulation. At a minimum, the amount of leave must be 40 hours of paid leave and 40 hours of sick leave per year and be usable for the reasons defined by the ordinance.
Note, the ordinance states that if a covered employee accrued paid sick leave before January 1, 2024, and the employer’s existing paid time off policy does not comply with the ordinance’s requirements, then on January 1, 2024, the paid sick leave that the covered employee is entitled to will roll over to the next 12-month period.
Frontloading
Employers may opt out of accruing paid leave and paid sick leave by granting employees 40 hours of paid leave and 40 hours of paid sick leave on their first day of employment or the first day of their 12-month accrual period. The employer need not carry over unused paid leave to a subsequent 12-month period if it frontloads paid leave. There is no mention of carryover of paid sick leave in this section, so presumably it must still be carried over.
Unlimited Paid Time Off (PTO) Policies
Some employers use unlimited paid time off (PTO) policies. If the employer grants such unlimited PTO on the first day of employment, then it does not have to accrue paid leave/paid sick leave nor allow it to be carried over.
However, unless otherwise provided in a collective bargaining agreement, upon a covered employee’s termination of employment or transfer out of Chicago, an employer with an unlimited PTO policy must pay the employee the difference between the monetary equivalent of 40 hours of PTO less the PTO the employee has taken in the last 12-month period prior to termination/transfer. Also, if a covered employee has used more than 40 hours of PTO in the last 12-month period prior to termination of employment, they cannot be required to repay any PTO.
Application to Collective Bargaining Agreements
The ordinance does not apply to construction industry employees covered by bona fide collective bargaining agreements. The ordinance also does not apply to employees covered by bona fide collective bargaining agreements in effect on January 1, 2024. After that date, the ordinance’s requirements may be waived in a bona fide collective bargaining agreement, but only if the waiver is set forth explicitly in the agreement in clear and unambiguous terms.
Notice and Posting
There are a number of notice/posting requirements under the Ordinance:
- Posting: Employers must post in a conspicuous place at each facility where any covered employee works a notice advising them of their right to paid time off under the ordinance (a form will be provided by the city). Employers who do not maintain a worksite within Chicago and households that serve as a worksite for domestic workers are exempt from the posting requirements.
- Notice on Hiring: Employers must provide covered employees with written notice of the employer’s leave policy, including notification requirements, at the commencement of employment or within five calendar days prior to any change in the policy requirements. Employers must provide covered employees with a 14-day written notice of changes to a policy that affects employees’ rights to final compensation for such leave.
- Notice with First Paycheck and in July: With the first paycheck to a covered employee and annually with a paycheck issued in July, every employer must provide a notice advising a covered employee of their right to paid time off under the ordinance. The above-mentioned form from the city will satisfy this requirement.
- Each Paycheck: Each time wages are paid, an employer must provide a covered employee written notification stating the updated amount of paid leave and paid sick leave available to the covered employee, as well as the accrual rates for each leave. Employers that credit the applicable leave on a monthly basis may provide such notice on a monthly basis as long as it includes the accrued paid time off since the last notification, reduced paid time off since the last notification and any unused paid time off available for use. Employers may choose a reasonable system for providing this notice, including but not limited to, listing available leave on each pay stub or developing an online system accessible to covered employees.
Violations and Private Cause of Action
Fines: Employers who violate the ordinance or related regulations will be fined between $1,000 and $3,000 for each offense (posting and annual notice violations carry fines of $500 for the first offense and $1,000 for subsequent violations). Employers are also liable to covered employees for three times the amount of any leave denied or lost due to a violation.
Private Right of Action: Employers who violate the ordinance are liable to the covered employee for damages three times the amount of leave denied or lost due to a violation, along with interest on that amount at the prevailing rate, as well as costs and reasonable attorney’s fees. Covered employees may sue in private action to recover such damages, plus interest, costs and reasonable attorney’s fees.
Retention of Records
Employers must maintain the following for at least five years, or for the duration of any claim, civil action or investigation pending pursuant to the ordinance, whichever is longer:
- A record of each covered employee’s name and address
- Hours worked
- Pay rate
- Wage agreement
- Number of paid time off hours earned for each year and the dates on which paid time off hours were taken and paid
- Records necessary to demonstrate compliance with the ordinance
Employers must also provide each covered employee with a copy of their records upon request.
Interaction with Illinois Paid Leave for All Workers Act
As a reminder, the Illinois Paid Leave for All Workers Act (the Act) – which requires employers to provide 40 hours of paid leave annually – also became effective on January 1, 2024. The Act states that its provisions do not apply to any employer that is covered by a municipal or county ordinance that is in effect on January 1, 2024, and which requires employers to give any form of paid leave to their employees. Accordingly, employers covered by the Chicago ordinance – which became effective on December 31, 2023 – will not be covered by the Illinois Paid Leave for All Workers Act.
The Upshot
To prepare for the ordinance’s July 1, 2024, effective date, employers should consider reviewing:
- Existing paid leave, paid sick leave, and “unlimited” paid time off policies for compliance with the ordinance
- Pay rates for calculating paid time off for Chicago employees to comply with the ordinance
- Payroll or other systems to ensure identification of compliant paid time off balances
- Employee handbooks for accurate policies and procedures under the ordinance
If you have any questions or concerns about implementing the Chicago Paid Leave and Paid Sick and Safe Leave Ordinance, contact your KRD advisor.
