In the early morning hours of February 16, 2018, the Austin City Council became the first city in the state of Texas to pass legislation requiring employers to provide paid sick time.
The Earned Sick Time Ordinance added a new chapter to the City Code effective for many employers on October 1, 2018. Austin, Tex. Code § 4-19-1 (2018), et seq. What does this mean for you?
Minimum Required Yearly Accrual for Employers with 15 Employees or Less:
If you are a small employer, that is, an employer with no more than 15 employees at any time in the preceding 12 months, you must provide your employees with at least 48 hours of earned sick time per year, beginning October 1, 2018. While the new ordinance did not make an exception for what it deemed “micro-businesses,” that is employers with no more than five employees, the ordinance did grant such “micro-businesses” until October 1, 2020, to comply.
Minimum Required Yearly Accrual for Employers with More than 15 Employees:
Medium and large employers must provide their employees with at least 64 hours of earned sick time per year, beginning October 1, 2018.
What Employees are Covered:
Employees who perform at least 80 hours of work for pay within the City of Austin are covered by this Ordinance. The Ordinance does not apply to independent contractors or unpaid interns.
Accrual Rates: Front-Loaded vs. Accrued Over Time:
Employees accrue paid sick leave at the rate of one hour for every 30 hours worked. Earned sick time is only accrued in hour-unit increments. An employer can grant all paid sick leave at the beginning of each year in a one-time, front-loaded grant; if so, employers are not obligated to allow its employees to carry over any unused sick leave into the following year. If, however, employees accrue their sick leave over the course of the year, they must be allowed to carry over unused sick leave – up to the applicable yearly cap — into the next year (i.e., for medium and large employers, employers must carry-over up to 64 hours and for small employers, employers must carry-over up to 48 hours).
Employers are not required to allow an employee to utilize earned sick time on more than 8 calendar days in a given calendar year. While the Ordinance allows employers to restrict employees from using earned sick time during their first 60 days of employment, this only applies if the employee has a term of employment for at least one year. Given that most employees are employed at-will, this exception is of limited utility.
Employees may request earned sick time for absences caused by:
- The employee’s physical or mental illness or injury, preventative medical or health care, or health condition; or
- The employee’s need to care for a family member’s physical or mental illness, preventative medical or health care, injury, or health condition; or
- The employee’s need to seek medical attention, seek relocation, obtain services of a victim services organization, or to participate in legal or court ordered action related to an incident of victimization from domestic abuse, sexual assault, or stalking involving the employee or employee’s family member.
Employers must provide earned sick time for an employee’s absence if the employee has available earned sick time and “makes a timely request for use of earned sick time before their scheduled work time.” The Ordinance, however, also indicates that an employee may not prevent an employee from using earned sick time for an unforeseeable qualified absence.
Verification Regarding Legitimacy of Reason for Usage:
Employers can adopt “reasonable verification procedures” to establish that an employee’s request for earned sick time meets one of the bases for requesting to use it. Such verification only may apply when there is a request to use earned sick time for more than three consecutive work days. The Ordinance provides no other guidance as to what “reasonable verification procedures” may be. What this means for employers is that if an employer has a policy in place that requires a doctor’s note for an absence of three days, the employer will need to remove that requirement, at least if an employee is utilizing Earned Sick Time for this absence. (Verification may only occur for absences of more than three days under the Ordinance).
Scheduling and Payment of Earned Sick Time:
Employers may not require an employee to find a replacement to cover the hours of earned sick time as a condition of using earned sick time. However, employees may still voluntarily exchange hours or trade shifts – the key is that such exchange is voluntary and not required by the employer.
Employers must pay earned sick time in an amount equal to what the employee would have earned if the employee had worked his/her scheduled work time (exclusive of overtime premiums, tips, or commissions), but not less than the state minimum wage. This particular requirement of the Ordinance is particularly expensive for restaurants employing tipped employees. Although restaurants can pay a sub-minimum wage of $2.13/hour to tipped employees (who then meet the minimum wage through tips), employees taking earned paid sick leave will need to be compensated at no less than $7.25/hour, more than $5/hour more than what such tipped employees are required to be paid under federal law.
Recordkeeping, Notice, and Handbook Requirements:
Employers are also required to provide employees at least monthly notice of their available earned sick time, which may be provided either electronically or in writing. In addition, employers must “maintain records establishing the amount of earned sick time accrued and used by each covered employee.” This requirement is particularly concerning for employers that presently provide employees unlimited PTO. These employers aren’t necessarily tracking usage. This new Ordinance will require employers to start tracking when employees are actually using earned sick time.
The Ordinance also mandates that any employer who provides an employee handbook or manual include the employees’ rights and remedies under the Ordinance therein. Similarly, Austin employers are required to post notices outlining the employees’ rights under the Ordinance in English and Spanish. (No notice posting will be required until the City of Austin makes such signage available publicly on its website.)
The statute does not address whether earned paid sick time must be paid out at termination. To avoid ambiguity, employers should specify that earned paid sick time is not going to be paid out at termination (if this is what the employer wishes to do). Employees who are rehired within six months following separation of employment may use any earned sick leave available to the employee at the time of separation. In addition, in the context of M&A deals, a successor company must provide to employees who were employed by a predecessor company all earned sick time available to the employee immediately before the acquisition.
Existing Paid Time Off, Vacation, and Sick Policies:
The Ordinance provides that employers who “make paid time off available to an employee under conditions that meet the accrual, purpose, and usage requirements” are not required to provide additional earned sick time to the employee. The Ordinance also states that an employer is not required to provide additional earned sick time to an employee if the employee has used paid time off for purposes other than the earned sick time Ordinance. Unlike some paid sick leave statutes in other jurisdictions (such as California), the Ordinance is silent as to whether unlimited PTO policies (very popular with many area tech-industry companies) would satisfy these requirements. Hopefully, the City of Austin will provide more clarity on this in the upcoming months.
Employers may not retaliate against employees for exercising their rights under any provision of the Earned Sick Time Ordinance. Any employer in violation of the Ordinance is subject to a $500 civil penalty for each violation.
What the Future Holds:
Employers with existing PTO, vacation, and/or sick policies should revise their policies to ensure the accrual, purpose, and usage requirements all meet the Ordinance’s requirements. For example, if an employer’s PTO policy only applies to full-time employees, the employer will need to revise its policy to allow part-time employees to accrue earned sick time as well. In this situation, employers may need to either amend their existing PTO policies to allow usage by part-time employees in a manner that meets this Ordinance or develop policies just for part-time employees.
And stay tuned: some Texas state legislators have vowed to challenge the new Austin law when the Legislature is back in session. However, that won’t happen until the earliest of 2019. The Earned Sick Time Ordinance will be effective for most employers on October 1, 2018, so employers should not wait for the state government to take action here. Take the steps necessary to ensure you are in compliance on the date applicable to your business.
Sources: Austin City Council Agenda, February 15, 2018 (http://www.austintexas.gov/edims/document.cfm?id=292412); Earned Sick Time Ordinance, Austin, Tex. Code § 4-19-1 (2018), et seq. (http://assets.austintexas.gov/austincouncilforum/0E-20180215135505.pdf)