Today, October 29, the New Jersey Paid Sick Leave Act goes into effect. Employers around the state have been working to update their sick leave or Paid Time Off policies to be fully compliant with this new workplace requirement. The law, however, has left many questions unanswered. Proposed Rules, which would hopefully clarify many of these issues, will not be issued until sometime next year. And Frequently Asked Questions published at the eleventh hour by the State Department of Labor have, in certain instances, caused greater confusion among many employers.
For example, the definition of “benefit year” is set forth in the law as follows:
“Benefit year” means the period of 12 consecutive months established by an employer in which an employee shall accrue and use earned sick leave as provided pursuant to section 2 of this act, provided that once the starting date of the benefit year is established by the employer it shall not be changed unless the employer notifies the commissioner of the change in accordance with regulations promulgated pursuant to this act. The commissioner shall impose a benefit year on any employer that the commissioner determines is changing the benefit year at times or in ways that prevent the accrual or use of earned sick leave by an employee.
Similarly, under the Proposed Rules, the following definition is provided:
“Benefit year” means the period of 12 consecutive months established by an employer in which all employees shall accrue and use earned sick leave.
These definitions seem to make it clear that an employer can choose any 12 month period to calculate benefits for employees, as long as it is the same. Many employers use a calendar year to calculate these benefits and many use an employee’s anniversary date to calculate these benefits. The anniversary date method on its face would be compliant with the law’s definition because the same 12 month period is used for each employee – the 12 months beginning on each employee’s anniversary date.
In the recently published FAQs, however, the Department of Labor takes a different position and states that the anniversary date method of calculating benefits is no longer permitted.
“11. May an employer have a different benefit year for each employee based on that employee’s anniversary date? No. The employer is required to establish a single benefit year for all employees.”
The FAQs do not have the force and effect of law, but this will be the position taken by the Department of Labor unless, and until, there is a successful legal challenge to this interpretation.
Another interesting FAQ which seems to have no support in the language of the law, deals with carry over time. The law states that an employee can accrue, use, or carry over up to 40 hours of sick leave each year. A reasonable interpretation of these principles would be that if an employee uses 40 hours of sick time or PTO in a year, there would be none left to carry over into the next year, even if the employer provided more than 40 hours of PTO to its employees. Not so, according to the Department of Labor:
“4. If an employer has an existing PTO policy that provides more than the 40 hours required under the Earned Sick Leave Law—for example, if the PTO program provides for 80 hours of PTO —and where under the existing PTO policy an employee had never been permitted to carry over PTO from one benefit year to the next; if after the Earned Sick Leave Law goes into effect the employee uses 40 hours of PTO in a given benefit year, must the employer permit the employee to carry over the remaining 40 hours of PTO to the next benefit year? In a compliant PTO policy where the employer chooses to advance PTO, rather than have the employee accrue PTO, in the final month of the employer’s benefit year, the employer must either provide the employee a payout for the full amount of unused PTO (up to 40 hours) or permit the employee to carry over any unused PTO, except that the employer is not required to permit the employee to carry forward from one benefit year to the next more than 40 hours of PTO. Thus, in the example cited above, the employer would be required to permit the employee to carry over the remaining 40 hours of PTO; which is to say, the carry-over requirement would not be extinguished by the employee’s use of 40 hours of PTO in a single benefit year. That said, however, as mentioned elsewhere in these FAQs, the Earned Sick Leave Law also expressly states that an employer shall not be required to permit the employee to use in any benefit year more than 40 hours of earned sick leave. Consequently, in the example cited above, although the employer would be required to permit the carry over of the remaining 40 hours of PTO, the employer would not be required to permit the use of more than 40 hours of PTO in any benefit year. That said, as mentioned in an earlier FAQ, the Earned Sick Leave Law also permits employers to agree through a collective bargaining agreement or employer policy, to provide rights or benefits that are more favorable to employees than those required by the Earned Sick Leave Law. In the event that an employer determines that it would be in the best interests of both the employer and its employees to permit employees to use more than 40 hours of PTO in a benefit year during which the employee has accumulated more than 40 hours of PTO through a combination of carry over of PTO from the prior year and advancing of PTO or accrual of PTO in the current benefit year, then the employer may permit employees to use more than 40 hours of PTO in a benefit year.”
So under this scenario, even though an employee has used 40 hours of PTO, the FAQ says the remaining 40 hours has to be carried over, even though an employee may never be allowed to use the carry over time under the law. As many employers have complained to us about a number of aspects of the NJ Sick Leave Act, this just doesn’t seem to make sense.
Stay tuned, as the confusion will almost certainly continue.
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