Chicago Businesses Face New Leave Obligations – Effective January 1, 2024

Employers across Illinois are readying their leave policies to comply with the Paid Leave for All Employers Act. Chicago employers need to prepare for something more.

On November 9, 2023, the Chicago City Council passed a new Paid Leave Ordinance that added 40 hours of paid leave to its present 40 hours of mandated sick leave. Chicago employers must take immediate action because the new Ordinance is effective January 1, 2024. If an employer already has a policy on December 31, 2023, that grants paid leave in an amount and a manner that meets or exceeds the requirements of the new Ordinance, the employer does not need to change. The new Ordinance is complicated, as the City Council merged two different leave concepts.

WHO IS A COVERED EMPLOYER?

A Covered Employer is a person or entity that employs at least 4 Covered Employees, working within the geographic boundaries of the City. The Ordinance also applies to households employing even 1 Domestic Worker.

The new Ordinance differentiates between Small Employers and Medium Employers.

• A Small Employer is an employer with 50 or fewer Covered Employees
• Medium Employer is an employer with 51 to 100 Covered Employees

When counting Covered Employees, their numbers will be aggregated if the employees are employed by members of a single unitary business group.

WHO IS A COVERED EMPLOYEE?

A Covered Employee includes any individual permitted to work for a Covered Employer with more than 4 employees. This includes “any employee who, in any particular two-week period, performs at least two hours of work for an employer while physically present within the geographic boundaries of the City of Chicago.” This also includes any compensated time spent making deliveries, sales calls or other travel related to business activity taking place in the City. However, it does not include uncompensated commuting time.

The Ordinance does not apply to outside salespersons, independent contractors or student workers at colleges or universities. However, it includes Domestic Workers working for employers with even 1 employee. A Domestic Worker is a person “whose primary duties include housekeeping, house cleaning, home management, nanny services, including childcare and child monitoring, caregiving, personal care or home health services for elderly persons or persons with illnesses, injuries or disabilities who require assistance in caring for themselves, laundering, cooking, companion services, chauffeuring and other household services to members of household or guests in or about a private home or residence or any other location where the domestic work is performed.”

NEW PAID LEAVE AND PAID SICK LEAVE

Providing Paid Leave will be new to Chicago employers who have been providing Paid Sick Leave since 2017. As of January 1, 2024, Covered Employees will be eligible for up to 80 hours of combined Paid Leave and Paid Sick Leave.

Paid Leave and Paid Sick Leave must be compensated at the same rate and with the same benefits, including health benefits, that the Covered Employee regularly earns during hours worked. For this purpose, wages do not include overtime pay, premium pay, gratuities or commissions. If the Covered Employee is engaged in an occupation where gratuities are usually a part of the remuneration, the employer is to pay at least minimum wage.

Paid Leave and Paid Sick Leave is to be paid no later than the payday for the next regular payroll period after the paid time off was taken.

PAYOUT AT TERMINATION

Unless otherwise provided in a collective bargaining agreement, unused, accrued Paid Leave must be paid out at termination of a Covered Employee’s employment or when they no longer meet the definition of a Covered Employee. In contrast, accrued but unused Paid Sick Leave is not required to be paid out.

The number of Covered Employees varies the payout of Paid Leave obligation. Small Employers — those with less than 50 employees — are exempt from this provision. Payout of unused Paid Leave will be phased in for Medium Employers –those with 51 to 100 employees. Until December 31, 2024, the payout of unused paid leave to Covered Employees will be capped at 16 hours. This cap for Medium Employers goes away on January 1, 2025. After that date, Medium Employers must pay out all unused, accrued Paid Leave, at termination of employment or when the employee is no longer a Covered Employee.

Employers must continue Covered Employees’ benefits when they use Paid Leave and Paid Sick Leave (although they can require the Covered Employee to pay their share of the cost of health care coverage).

NO RETALIATION/NO REPLACEMENT WORKERS

Employers may not retaliate against a Covered Employee for requesting or using Paid Leave or Paid Sick Leave. In addition, employers may not require their Covered Employees to find a replacement or substitute worker when they request or use Paid Leave or Paid Sick Leave.

ACCRUAL OF PAID LEAVE AND PAID SICK LEAVE

Starting on January 1, 2024, or on the first day of the Covered Employee’s employment, a Covered Employee begins to accrue Paid Leave and Paid Sick Leave.

For every 35 hours worked, a Covered Employee accrues one hour of Paid Leave and one hour of Paid Sick Leave, capped at 80 total hours in a 12-month period. (This is a change from the prior ordinance. Under the former ordinance, Paid Sick Leave was accrued at a rate of one hour for every 40 hours worked.)

Paid Leave and Paid Sick Leave still accrue in one-hour increments.

If an employer provides more than 80 hours of combined Paid Leave and Paid Sick Leave in a calendar year, it may accrue time on a monthly, rather than hourly, basis.

CARRY-FORWARD

A Covered Employee may carry-forward up to 16 hours of Paid Leave and up to 80 hours of Paid Sick Leave. (This is another change from the prior ordinance, which mandated the carry forward of up to one-half of unused time, plus an additional 40 hours for employees eligible for Family and Medical Leave or a possible total of 60 hours.)

Employers are not required to pay for any forfeited time that is not carried forward into the next 12-month period.

If an employer denies a Covered Employee meaningful access to their paid time off, the employer is required to increase the permissible carry-forward to include the carry-forward of any denied Paid Leave or Paid Sick Leave.

FRONTLOADING

Employers can avoid carry-forward obligations by frontloading their Covered Employees’ Paid Leave and Paid Sick Leave. An employer frontloads when it immediately grants their Covered Employees 40 hours of Paid Leave or 40 hours of Paid Sick Leave or both on their first day of employment or the first day of the 12-month accrual period.

ANOTHER OPTION: UNLIMITED PAID TIME OFF

An employer also can avoid the accrual method by providing unlimited hours of paid time off that can be used for any reason.

USE OF PAID LEAVE OR PAID SICK LEAVE

Employers must allow Covered Employees to use accrued Paid Sick Leave no later than the 30th day following the Covered Employees’ employment. (This is a change from the prior ordinance that allowed use only after 180 days of employment.)

Employers must allow Covered Employees to use accrued Paid Leave no later than the 90th day following the Covered Employee’s employment.

Covered Employees are empowered to choose whether to use Paid Sick Leave or Paid Leave prior to using any other leave provided by the employer or by city, state or federal law.

MINIMUM INCREMENT OF USE

Employers may limit the minimum increment of use for Paid Leave and Paid Sick Leave.

• Paid Leave may be limited to use of 4 hours (which is greater than the State’s restriction of 2 hours)
• Paid Sick Leave may be limited to use of 2 hours

Employers can provide smaller increments of daily use.

NOTICE FOR USE OF PAID LEAVE

• If the need for Paid Leave is foreseeable, the employer can require its Covered Employees to provide 7 days’ advance notice
• If the need for Paid Leave is not foreseeable, the employer can require its Covered Employees to provide notice as soon as practicable by telephone, email or other means

Employers cannot require pre-approval for Covered Employees to use Paid Leave, except to maintain the continuity of its operations.

NO REASON FOR USE OF PAID LEAVE

Covered Employees do not have to provide a reason for using Paid Leave or provide documentation as proof or in support of the requested leave.

NOTICE FOR USE OF PAID SICK LEAVE

Notice for the use of Paid Sick Leave has not changed from the prior Ordinance. Covered Employees may use Paid Sick Leave for their own or family member’s illness or should they or their family member be a victim of domestic violence, a sex offense or human trafficking. They also can use Paid Sick Leave when their place of business is closed or should a Covered Employee need to care for a family member whose school, class or place of care has been closed.

• If the need for Paid Sick Leave is foreseeable, the employer can require up to 7 days’ advance notice
• If the need for Paid Sick Leave is not foreseeable, the employer can require that notice be given as soon as practicable by telephone, email or other means

If a Covered Employee is absent for more than 3 consecutive workdays, the employer may require certification that the use of Paid Sick Leave was for an authorized use under the Ordinance. Employers may discipline employees who request Paid Sick Leave for unauthorized purposes.

POSTING AND NOTICE REQUIRED

In a conspicuous place where Covered Employees work, Chicago employers must post a notice advising Covered Employees of their rights. The City will prepare and make a form notice available. Employers that do not maintain a business facility within the geographic boundaries of the City and households that serve as worksites for Domestic Workers are not required to post a notice.

Employers also must provide notice to Covered Employees with their first paycheck and each year within 30 days of July 1st.

Each time a Covered Employees is paid (or monthly if leave is accrued monthly), the employer must provide the Covered Employee with written notification, stating the updated amount of Paid Leave and Paid Sick Leave available for use and the accrual rates of the Paid and Paid Sick Leave provided to the Covered Employee. The update should include the use of paid time off used since the last notification.

Most employers will include this information on the Covered Employee’s paystub or even in an online system where Covered Employees can access their own paid leave information.

If an employer is changing its paid time off notification requirements, it must provide Covered Employees with at least 14 days’ written notice of the change. (This is more than the State requirement of 5 days’ advance prior written notice.)

PRIVATE RIGHT OF ACTION

Covered Employees have a private right of action and can recover three times the full amount of the paid leave denied as damages as well as their costs and reasonable attorney’s fees.

PENALTIES

Employers who violate this Ordinance will be fined between $1,000 and $3,000 for each separate violation, except for posting violations, which will result in a fine of $500 for the first violation and $1,000 for subsequent violations. Each day that a violation continues constitutes a separate and distinct offense.

RECORD RETENTION

Employees must maintain their records for at least 5 years and must provide each Covered Employee with a copy of their records upon their request.

LEAVE POLICIES COMPARISON

Below is a comprehensive table that explores some variations in leave policies for Illinois, Chicago and the Cook County opt-in municipalities. It breaks down key aspects of leave requirements such as accrual rates, usage timelines and notice requirements. Understanding these distinctions is crucial for employers with the new state and Chicago laws fast approaching.

HMB Legal Counsel will assist Chicago employers with compliance and other employment law developments. Should you have any questions, please contact Jeri Baran or a member of HMB’s team.