New Jersey Department of Labor Issues Final Regulations for Earned Sick Leave Law

The New Jersey Earned Sick Leave Law (“ESLL”), which became effective in October 2018, requires New Jersey employers, among other things, to provide their employees with one hour of sick leave for every 30 hours worked, with a maximum of 40 hours annual paid sick leave. Such leave may be used for an employee to care for their own or a family member’s physical or mental health or injury; address domestic or sexual violence against themselves or a family member; attend a child’s school-related meeting, conference or event; or take care of their children when school or child care is closed due to an epidemic or public health emergency.

The New Jersey Department of Labor and Workforce Development (“NJDOL” or “Department”) recently issued final regulations for the ESLL (“final regulations” or “regulations”), ending more than a year of waiting for employers, from the time the NJDOL issued proposed ESLL rules (“proposed rules”), for which the 60-day comment period ended in December 2018. The regulations can be found here.

The final regulations do not contain much in the way of substantive changes as compared to the proposed rules, but include extensive responses to more than 100 public comments, and provide guidance to employers attempting to navigate the ESLL’s complicated requirements. Some highlights of the regulations are discussed below.

Single Benefit Year. The proposed rules require an employer to establish a “single benefit year” for all employees of an employer, for the purposes of determining employee use and accrual of earned sick leave. In response to commenter concern that such a requirement would, among other things, create confusion for employers who use anniversary dates to measure a “benefit year” for other purposes (e.g., to determine other types of available paid time off (“PTO”) to employees and when such time off may be taken), the NJDOL rejected the initial rule, and agreed to adopt, in subsequent rulemaking, a new rule permitting employers to determine the benefit year (and permitting use of employee anniversary dates) used for ESLL purposes.

Two Policies May Be “Better” Than One. Employers who use a single PTO policy for vacation, personal, and sick time must proceed carefully. The NJDOL’s comments explain that to comply with the ESLL, an employer’s PTO policy must: (a) allow an employee to use all PTO for any purpose identified in the law; and (b) meet or exceed the law’s additional requirements (such as, among others, accrual, advancement, carryover, and payout requirements). For example, if an employer provides 20 days of PTO to its employees, the Department’s position is that all 20 PTO days (not limited to 40 hours of leave under ESLL) must satisfy all ESLL requirements. Given the Department’s position, employers may consider having a sick time policy satisfying the ESLL’s requirements, and a separate PTO policy for vacation, personal, and/or other types of PTO, which the NJDOL recognizes as an option.

Stay Awake at the Bargaining Table. The comments confirm that “employers and unions” may waive rights provided by the ESLL during negotiations of a collective bargaining agreement (“CBA”), resulting in employees receiving “fewer paid sick days” than that provided under the law. Where parties to a CBA continue to operate under the terms of an expired agreement, or when the parties extend the terms of the expired agreement by mutual agreement, the Department’s position is that employees covered under the CBA are entitled to all of the ESLL’s benefits and protections, upon expiration of the agreement. The parties, however, can waive the rights or benefits provided under the law while negotiating the successor agreement.

40 Hours Means 40 Hours. The ESLL provides for a maximum of 40 hours of leave per benefit year, and includes certain carry over and payout requirements. Many commenters requested clarification on whether an employee was, in fact, limited to 40 hours of sick leave during any benefit year, given the interplay of the sick leave law with these requirements. The NJDOL confirmed that employers are not required to permit employees to use more than 40 hours of earned sick leave during any benefit year, including in situations where an employee carries over unused sick time from one benefit year to the next and has more than 40 hours of accrued leave for the new benefit year.

Non-Discretionary Bonuses. A commenter observed that the proposed rules required employers to include non-discretionary bonuses in the rate of pay calculation for earned sick leave, which may create an “administrative hardship” for employers who pay “non-discretionary bonuses” (i.e., those measured by hours worked, production or efficiency) on a quarterly or annual basis, and asked that such a requirement be eliminated. The NJDOL rejected this change, confirming its position that employers must include non-discretionary bonuses (which according to the DOL are “consistent and predictable” and a “core component” of employee compensation) when calculating sick leave pay. The NJDOL, however, did not address how employers can account for non-discretionary bonuses in the pay calculation, since such an incentive payment may be unknown at the time sick leave is used.

Just the Tip, Please. Commenters expressed concern as to the proposed rule’s requirements for determining the rate at which tipped employees would be paid for earned sick leave. The comments provide that for ESLL time, tipped employees should be paid the same rate of pay as the employee normally earns. The method excludes overtime, and recognizes that employers may not always be able to determine the exact hourly wage of tipped employees. In these circumstances, employers are also permitted to set a pay rate for ESLL purposes at New Jersey’s minimum hourly wage.

Black-out Dates. The ESLL permits employers to restrict use of “foreseeable earned sick leave” on certain dates, but contains no definition of “certain dates.” In the proposed rules, the Department clarified that when an employee’s need to use earned sick leave is “foreseeable,” an employer may restrict use of such leave on certain dates, limited to “verifiable high volume periods or special events,” during which an employee’s use of sick leave would “unduly disrupt” an employer’s operations. Commenters questioned this rule, with one asking that the Department issue a rule capping the number of such “black out” days. The NJDOL rejected this request, noting its policy decision to strike a balance between employee and employer rights under the law.

Although perhaps just recently drafted and implemented, in light of the final rules and substantial guidance contained in the DOL’s responses to comments, employers should review their ESLL policies to ensure compliance, and speak with employment counsel, as needed.

If you have any questions regarding this blog, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

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