This post was written by Cindy S. Minniti and Mark S. Goldstein.
At long last, the New York City Department of Consumer Affairs (DCA) – the agency tasked with administering the New York City Earned Sick Time Act (ESTA) – has issued Final Rules (Rules) addressing ambiguities in ESTA’s statutory text, responding to questions left unanswered by the law itself, and otherwise providing guidance for employers on a number of ESTA’s particular requirements. The DCA introduced a preliminary version of the Rules March 28, and a public hearing was held April 29. A copy of the Final Rules – as published in the City Record July 30 – can be found here.
What Does ESTA Require?
As we previously detailed here and here, as of April 1, 2014 (ESTA’s effective date), employers with five or more employees are required to provide employees with up to 40 hours of paid sick leave per calendar year. Sick leave must accrue at a rate of at least one hour of leave for every 30 hours worked. Leave may be earned by any employee who performs more than 80 hours of work in NYC in a calendar year. Up to 40 hours of unused sick leave may carry over to the following calendar year, although employers are only required to allow use of up to 40 hours of sick leave per year.
Employers with fewer than five employees must provide comparable unpaid sick leave benefits. With limited exception, ESTA covers all employees, including those classified as exempt, non-exempt, full-time, part-time, and temporary.
Employers also must disseminate a Notice of Employee Rights to all new hires upon commencement of employment. Notices must be provided in both English and – if made available by the DCA – the employee’s primary language. Copies of the Notice in a multitude of dialects can be found here.
On July 30, 2014, employees employed as of April 1, 2014 were entitled to begin using accrued sick leave (whether paid or unpaid). All other employees may begin using accrued sick leave 120 calendar days after the start of their employment.
How Do the Final Rules Affect My Obligations Under ESTA?
Following is a detailed overview of the particular ESTA requirements clarified by the Rules.
Scope of Employee Coverage: Of critical importance during ESTA’s infancy, the Rules clarify the scope of the term “employee.” ESTA defines “employee” as any individual “employed for hire within the city of New York for more than eighty hours in a calendar year.” The Rules make clear that “[a]n employee is entitled to the protections of [ESTA] regardless of immigration status.” The Rules go on to specify that only work performed while physically located in NYC, including via telecommuting, counts toward the 80-hour threshold, irrespective of where the employer is located. Particularly impacted by this provision in the Rules are employees with multiple work locations, who telecommute, or who perform transient services in NYC.
Employee Notification of the Need to Use Sick Time: One question frequently asked by NYC employers is whether employees must provide prior notice of the need to use accrued sick time. The answer, in most instances, is YES. Under ESTA, an employer may require up to seven days’ advance notice, in writing if it elects, where the need to use sick time is foreseeable. And where such need is not foreseeable, employees must notify their employer “as soon as practicable.”
The Rules build on these requirements, noting that the determination of whether providing notice “is practicable in a given situation” requires an assessment of the specific “facts and circumstances.” The Rules further provide that an employer requiring notice of the need to use sick time – where such need is not foreseeable – must implement “a written policy that contains procedures for the employee to provide notice as soon as practicable.” A written policy also must be adopted if the employer requires advance notice for foreseeable use of sick time.
Employer Demands for Medical Notes: For businesses concerned with potential abuses of sick leave, ESTA provides little recourse. Employers may seek documentation (such as from a licensed health care provider) confirming ESTA-authorized use of sick leave only where an employee is absent for more than three consecutive work days. For shorter absences, employers may only request “written confirmation” – a term left undefined by both ESTA and the Rules – from the employee that ESTA-compliant sick leave was used.
The Rules clarify that the term “work days” refers to the “days or parts of days” on which an employee would have worked had (s)he not used sick time. Moreover, for absences of more than three consecutive days, the Rules specify that, upon return to work, an employee must be afforded at least seven days to procure verifying documentation from a licensed health care provider. The “employee is responsible for the cost of any documentation not covered by” a benefit plan. Employers who desire a second opinion are out of luck: employers may not require an employee who has provided written documentation from a licensed health care provider to obtain documentation from a second provider.
Rate of Pay: One of the more pressing uncertainties surrounding ESTA is the rate at which sick time must be compensated. The Rules resolve this uncertainty. The Rules mandate that, generally, paid sick leave must be compensated at the employee’s regular hourly rate of pay even if it is used during hours that would otherwise have been designated as overtime.
Of particular interest to hospitality industry employers, tipped employees are not entitled to lost gratuities while using sick leave, but they still must receive at the least the minimum wage – currently $8 per hour – while absent. And employees paid on a commission basis must receive either their base wage or the applicable minimum wage, whichever is greater.
Payment for Used Sick Time: The DCA has also legislated the timing of such payments via the Rules, providing that “[s]ick time must be paid no later than the payday for the next regular payroll period beginning after the sick time was used.” A carve-out exists, however, for employers that request written documentation confirming the use of sick leave. In such circumstances, used sick time need not be compensated until appropriate documentation has been submitted.
Joint Employer Liability: Like the New York Labor Law, the Rules permit the DCA to hold “joint employers” individually and collectively accountable for ESTA violations. Just as critically, the Rules provide that, “[i]f an employee is employed jointly by two or more joint employers, all of the employee’s work for each of the joint employers will be considered as a single employment for purposes of accrual and use of sick time under [ESTA].” As a slight consolation to the business community, the Rules allow joint employers to allocate ESTA responsibilities among themselves. Nevertheless, expect this provision to be the subject of future litigation.
Minimum Hourly Increments for the Use of Sick Leave: The Rules reiterate that, although employees may determine how much sick time they need to use, employers may set a minimum increment for use not to exceed four hours. If, however, under the particular circumstances a four-hour increment would be unreasonable – e.g., the employee has not accrued four hours of sick leave – then a lower threshold must be adopted.
Transfer of Sick Time Upon the Sale of a Business: The Rules also add a wrinkle to local business sales. Specifically, the DCA makes clear in the Rules that, “[i]f an employer sells its business . . . an employee will retain and may use all accrued sick time if the employee continues to perform work within the City of New York for the successor employer.” Thus, unless a purchase agreement specifies otherwise, successor employers may be on the hook for sick leave accrued prior to consummation of the sale.
Distribution/Posting of Sick Leave Policies: Finally, the Rules reaffirm that employers must distribute or post their written sick time policies. This requirement can be satisfied by, among other things, personal distribution, inclusion in an employee handbook, posting on the company intranet, or displaying in a “conspicuous location” where notices and posters are customarily posted. Failure to properly distribute or post written policies can result in civil penalties.
How Does This Affect My Company?
As supplemented by the Rules, ESTA contains many potential pitfalls for employers. And given the zeal with which Mayor Bill de Blasio pushed through an amendment to ESTA earlier this year, employers should expect aggressive enforcement by the DCA. Employers of all sizes should consult with counsel immediately about implementing and adhering to the law’s provisions. Whether you have one employee working in NYC or 1,000, compliance with each of the reticulated ESTA requirements, as supplemented by the Final Rules, is an absolute must.