[authors: Erin K. Clarke, Brian D. Pedrow]

With Philadelphia’s Paid Sick Leave Ordinance about to take effect on July 1, 2012, employers may be uncertain about the scope of their obligations. In an effort to clarify some of the issues, the City has issued guidelines on the mandated leave benefit.

Much of the confusion surrounding the Paid Sick Leave Ordinance stems from the fact that it refers to an earlier bill that was passed by City Council in June 2011, but vetoed by Mayor Michael Nutter. The new guidelines, New Ordinances Impacting City Contractors/Recipients of City Financial Aid, clarify which provisions of the vetoed bill are operative under the Paid Sick Leave Ordinance.

Covered Employers

The Paid Sick Leave Ordinance amends the Philadelphia 21st Century Minimum Wage and Benefits Standard Ordinance and applies only to employers covered by that ordinance. By contrast, the vetoed bill would have applied to nearly all employers in the City of Philadelphia.

Employers subject to the 21st Century Ordinance and the Paid Sick Leave Ordinance include:

• The City of Philadelphia, its agencies, departments, and offices
• For-profit service contractors who have City contract(s) for $10,000 or more, with annual gross receipts of more than $1 million
• Non-profit service contractors that receive or are subcontractors on contract(s) of more than $100,000 in a 12-month period
• Recipients of City leases, concessions, or franchises with more than 25 employees
• City financial aid recipients (for a period of five years following receipt of aid)
• Public agencies that receive City contracts for $10,000 or more in a 12-month period

According to the guidelines, employers with fewer than five employees are not subject to the law, and its requirements do not apply to subcontractors.

The ordinance applies to contractors upon receiving a “new” contract, lease, concession, franchise, or financial aid from the City. In the 21st Century Ordinance, the term “new” was defined to include any arrangement entered into after the it became effective in 2005.

The broadest category of covered employers is “City financial aid recipients,” which encompasses any entity that receives direct assistance from the City in the form of grants, loans, loan guarantees, tax incentives, in-kind services, waivers of City fees, or real property exceeding $100,000 in any 12-month period, among others.

The City’s Managing Director’s Office (MDO) advised that employers questioning whether the ordinance applies to them may seek a waiver pursuant to the waiver provisions of the 21st Century Ordinance. Additional information about waiver applications appears in the guidelines.

Mandated Paid Sick Leave

The Paid Sick Leave Ordinance provides that a covered employer must provide at least the number of earned sick days that the employer would have been required to provide if the provisions of the vetoed bill had been enacted into law. The vetoed bill contained many detailed provisions governing the mandated sick leave benefit, including accrual, usage, and carryover. According to the guidelines, the provisions of the vetoed bill operative under the enacted Paid Sick Leave Ordinance include:

• Covered employees are only full-time, non-temporary, non-seasonal employees who work in Philadelphia.
• For employers with 12 or more employees, covered employees have the right to accrue one hour of paid sick time for every 40 hours worked in Philadelphia, and must be allowed to accrue up to 56 hours of paid sick time in a calendar year (or more at the employer’s option).
• If the employer employs more than five but fewer than 11 employees, it is required to provide covered employees with at least 32 hours paid sick time per year.
• Employees will begin to accrue sick time at the start of employment and can use it as accrued beginning after the 90th day of employment.
• Employees are allowed to use accrued paid sick time for their own mental or physical illness, injury, etc., or for preventative care.
• Employees are allowed to use their accrued sick time to take care of a family member. A family member is defined by the employer’s own personnel policies. (This provision differs from the vetoed bill.)
• Employees must provide a good-faith effort to give their employer prior notice of taking sick time and provide reasonable documentation of the sick time when used for two consecutive days. Again, what is required as a good faith effort to provide notice and documentation to the employer will be defined by the employer’s own personnel policies. (These provisions differ from the vetoed bill.)
• Employees may use sick time in hourly increments; however, the employer may follow its own personnel policies when determining sick time increments. (This provision differs from the vetoed bill.)
• Covered employers must provide a notice and posting of the employees’ rights under the ordinance.

The guidelines make no reference to other provisions of the vetoed bill, including the right to carry over accrued sick leave from year-to-year; whether an employee’s request to use the leave benefit must be in writing and the content of such notice; employer recordkeeping requirements; and confidentiality of medical information. Presumably, such provisions have not been incorporated into the Paid Sick Leave Ordinance.

According to the MDO, employers may rely on the guidelines for interpretation of the scope of the requirements under the Paid Sick Leave Ordinance.

Existing Paid Leave Policies

The guidelines also address the interplay of an employer’s existing paid leave policies with the Paid Sick Leave Ordinance in the following provision: “If the Employer has a paid leave policy, which makes available an amount of ‘paid leave’ per year that includes vacation days, personal days, sick days, etc., it will meet the requirements of the sick pay ordinance as long as the minimum number of days required is still provided.” Unlike the vetoed bill, the guidelines do not address expressly Paid Time Off (PTO) as a form of paid leave.

Collective Bargaining Agreements

Questions have arisen about the application of the Paid Sick Leave Ordinance to employers with existing collective bargaining agreements. When new laws are enacted that impact terms and conditions of employment for unionized employees, it is common to see a delayed effective date for such laws, i.e. upon expiration of the bargaining agreement. Such an approach avoids any potential constitutional problems that arise when an ordinance has the effect of impairing contract clauses. The Paid Sick Leave Ordinance, however, contains no such delayed effective dates. Accordingly, it is presumably effective on July 1, 2012, even for employers with existing bargaining agreements.

The Paid Sick Leave Ordinance contains no reference to collective bargaining agreements, unlike the vetoed bill which specifically had provided that paid sick leave subject to a bona fide bargaining agreement is excluded from coverage by the bill. The 21st Century Ordinance states only that all or part of the Ordinance’s requirements may be waived by a bona fide collective bargaining agreement. Thus, employers are free to negotiate for a waiver of the sick leave mandate.

The waiver provisions of the 21st Century Ordinance include a variety of reasons for seeking a waiver of the ordinance; however, conflicts with a bargaining agreement are not among them. By contrast, another recently enacted ordinance—the Equal Benefits Ordinance, which requires certain service contractors with the City to extend the same employment benefits to life partners of employees on July 1, 2012—specifically provides for a waiver if its provisions “interfere” with a bargaining agreement. The MDO has advised that conflicts with a bargaining agreement nonetheless may serve as a basis for a waiver application under the Paid Sick Leave Ordinance as well.

Covered employers now should be evaluating necessary steps for compliance with the Paid Sick Leave Ordinance and/or whether a waiver application is appropriate. Compliance measures include the adoption of a paid sick leave policy, or the amendment to existing policies to meet the requirements of the ordinance. In addition, covered employers must notify employees and post a notice regarding the requirements of the law.

If you would like assistance with a waiver application or compliance measures, please contact Brian D. Pedrow at 215.864.8108 or pedrow@ballardspahr.com, Erin K. Clarke at 215.864.8318 or clarkee@ballardspahr.com, or the members of the Labor and Employment Group with whom you work.