NJ Enacts State-Wide Paid Sick Leave

On May 2, 2018, Governor Murphy signed into law the New Jersey Paid Sick Leave Act (the “Act”). This new law requires employers state-wide to provide employees with paid time off for sickness. We had been tracking this law, which was passed by the legislature in April and which new Governor Murphy had pledged to support. The Act is particularly important because it preempts the various municipal paid sick leave ordinances throughout the State, thereby providing uniformity and consistency.[1] The Act will go into effect in 180 days on October 29, 2018. Here’s what you need to know to get ready:

Who is Covered?

All employees working for “compensation” are covered under the Act; however, certain employees are exempted, such as construction industry employees working under a collective bargaining agreement (CBA), per diem hospital health care employees, or public employees who are provided with sick leave.

Virtually every private employer in the State is covered by the Act including, temporary service firms. Public employers providing its employees with sick leave are not covered under the Act.

What If There Is a Collective Bargaining Agreement?

As indicated above, the Act specifically exempts employees covered by CBAs that are either currently in effect now or signed before the Act becomes effective in October 2018. However, even after the Act goes into effect, parties to a CBA may negotiate different paid sick leave benefits, thereby waiving the rights under the Act.

How Much Leave Is Required and How Is It Accrued?

Employees shall be entitled to five (5) days or forty (40) hours of paid sick leave per benefit year. Employers must establish a “benefit year,” which should be any consecutive 12-month period. Most employers rely upon a typical January to December benefit year, and once the benefit year is established, it cannot be changed without approval by the Commissioner of Labor and Workforce Development. Employers may award employees with all forty (40) hours at the beginning of each benefit year or may require that employees accrue paid sick leave at a rate of one (1) hour of paid sick leave for every thirty (30) hours worked. 

In the case of a temporary help service firm placing an employee with client firms, earned sick leave shall accrue on the basis of the total time worked on assignment with the temporary help service firm, not separately for each client firm to which the employee is assigned.

New employees shall begin to accrue paid sick leave at the commencement of employment but must wait 120 days before being able to use it.

Many private employers currently offer employees with paid time off, such as PTO, vacation, sick, or personal time. Employers are permitted to use these existing policies to satisfy the requirements in the Act; however, employers must ensure that their policies permit employees to use existing paid time off as provided in the Act.

Must Employees “Use It or Lose It”?

The Act provides employers with a choice. 

In cases where paid sick leave is accrued, employees shall be entitled to “carry-over” up to forty (40) hours of paid sick leave under this law, but are only able to use forty (40) hours in one year. An employer may provide an offer to an employee for payment of unused earned sick leave at the end of the benefit year. The employee shall choose, no later than ten (10) calendar days from the date of the employer’s offer, whether to accept a payment or decline a payment.  If the employee agrees to receive a payment, the employee shall choose a payment for the full amount of unused earned sick leave or for 50 percent of the amount of unused earned sick leave.  If the employee declines a payment for unused earned sick leave or agrees to a payment for 50 percent of the amount of unused sick leave, the employee shall be entitled to carry forward any unused or unpaid earned sick leave.  If the employee agrees to a payment for the full amount of unused earned sick leave, the employee shall not be entitled to carry forward any earned sick leave to the proceeding benefit year.  

In cases where an employer choses to award or front-load paid sick leave at the beginning of a benefit year (in lieu of requiring accrual), employers may either permit “carry-over” or pay out paid sick leave at the end of each benefit year.

In either scenario, the payment amount shall be based on the same rate of pay that the employee earns at the time of the payment. 

Qualifying Reasons to Use Paid Sick Leave

Paid sick leave can be used for the following reasons:

• An employee’s own mental or physical illness, including preventive medical care.
• Care for a “covered” family member’s mental or physical illness, including preventive medical care.
• An employee or his or her family member’s status as a victim of domestic or sexual violence, including, medical treatment, counseling, legal proceedings, or relocation.
• Public health emergency closing employee’s workplace or their child(s)’ school or daycare.
• Meetings requested/required by child’s school to discuss child’s health condition or disability.

A covered family member is broadly defined to include all blood relatives or those whose close relationship is the equivalent of a family relationship.

How Is Paid Sick Leave Used and Paid?

The employer shall pay the employee for earned sick leave at the same rate of pay with the same benefits as the employee normally earns, except that the pay rate shall not be less than the minimum wage required for the employee.

An employer may choose the increments in which its employees may use earned sick leave, provided that the largest increment of earned sick leave that an employee may be required to use for each shift for which earned sick leave is used shall be the number of hours the employee was scheduled to work during that shift. For example, if the employee normally works a seven (7) hour day, 9:00 a.m. to 5:00 p.m. with an unpaid lunch break, an employer cannot require that the employee use eight (8) hours of paid sick leave if they are absent the entire day.

Moreover, employers may not require an employee to find a replacement to cover the employee's absence.

How Much Notice is Required?

If an employee's need to use earned sick leave is foreseeable, an employer may require advance notice of up to seven (7) calendar days, along with the expected duration of the absence. Employees are required to schedule use of paid sick leave in a way that is least disruptive to the employer’s operations. For example, an employer is allowed to “black-out” certain days for “foreseeable” sick leave use. Meaning that if an employer has a particularly busy time, they can prohibit employees from using paid sick leave during that time. 

In cases of emergency where the leave is not foreseeable, employees should provide notice as soon as practicable. If paid sick leave must be used during a “black-out” period for unforeseeable reasons, employers are permitted to required reasonable documentation supporting the absence. 

Where an employee uses three or more earned sick leave days, an employer may also require reasonable documentation that the leave is being taken for the purpose under the Act.  If the leave is being used for an employee or their family member’s medical treatment, reasonable documentation would include a signed document from the employee’s or family member’s treating physician indicating the need for the leave and, if possible, the number of days of leave.

In cases of domestic or sexual violence, reasonable documentation would include any of the following: medical documentation; a law enforcement agency record or report; a court order; documentation that the perpetrator of the domestic or sexual violence has been convicted of a domestic or sexual violence offense; certification from a certified Domestic Violence Specialist, a representative of a designated domestic violence agency, or other victim services organization.

If there is a public health emergency, reasonable documentation would include a copy of the order of the public official or the determination by the health authority.

Any documentation or information received by an employer related to the use of paid sick leave must be kept confidential.

What Happens to the Paid Sick Leave Upon an Employees’ Separation From Employment?

Employees normally forfeit unused accrued paid sick leave under the Act, unless an employer’s policy or applicable CBA provides for payment upon separation from employment.

If an employee is rehired or reinstated within six months of separation of employment, any unused earned sick leave shall also be reinstated and prior employment with the employer shall be counted towards meeting the eligibility requirements.

Retaliation Is Prohibited

Employers are prohibited from taking retaliation against any employee for his or her use of paid sick leave under this Act. Interestingly, the Act provides for a rebuttable presumption of an unlawful retaliatory personnel action whenever an employer takes adverse action against an employee within 90 days of when that employee:

• files a complaint with the department or a court alleging a violation of any provision of the Act;
• informs any person about an employer's alleged violation of the Act;
• cooperates with the department or other persons in the investigation or prosecution of any alleged violation of the Act;
• opposes any policy, practice, or act that is unlawful under the Act; or
• informs any person of his or her rights under the Act.

What Are the Employer’s Notice and Document Retention Requirements?

Currently, a state-created notice/poster is being developed (“Notice”). Upon its release, employers are required to post the Notice in a conspicuous place along with other workplace posters. Employers must also distribute the Notice to all employees within thirty (30) days of the Notice being issued by the State. 

Moreover, employers must include the Notice within their new hire paperwork for all new hires. We recommend that employers include a written acknowledgment from employee to document receipt. Be sure to include a copy of the Notice in Spanish if the majority of the employer’s workforce necessitates a translated version of the Notice.

Finally, employers must maintain records tracking employee hours worked, paid sick leave balances, and paid sick leave use for a period of five years. There is a presumption that the employer has failed to provide the earned sick leave unless it has maintained and retained adequate documentation as to the number of hours worked by the employee and the earned sick leave taken by the employee.

The Bottom Line

Employers should review their Employment Handbooks and paid time off policies to determine whether their current policies comply with the Act or whether revisions are necessary. Employers should make decisions about “use it or lose it” policies and whether paid time off shall be payable or forfeited at time of termination. Employers must distribute the Notice when it becomes available and include it with their new hire paperwork, retaining a signed written acknowledgment of receipt. Finally, employers need to implement tracking and record keeping procedures.