New Jersey Department of Labor Proposes Regulations Implementing Sick and Safe Leave Law

by Epstein Becker & Green
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On September 13, 2018, the New Jersey Department of Labor and Workforce Development (“NJ DOL”) issued proposed regulations to implement the state’s new paid sick and safe leave (“sick leave”) law—P.L. 2018, c. 10 (“Act”). The proposed regulations have a 60-day public comment period, which may be extended. Therefore, the final regulations will not be adopted before 2019. The Act, which was the subject of a previous Act Now Advisory, becomes effective October 29, 2018. In sum, the Act requires all employers to provide paid sick leave to their New Jersey employees. With limited exception, the Act entitles part-time and full-time employees, whether regular, temporary, or seasonal, to sick leave.

The proposed regulations generally track the provisions of the Act and address how sick leave must be accrued, used, paid, paid out, and carried over from year to year. In addition, the proposed regulations echo the Act’s notification and recordkeeping requirements, as well as its prohibitions against retaliation and discrimination. The regulations, like the Act, incorporate the state’s Wage and Hour Law with regard to penalties and the administrative procedures for addressing alleged violations.

Paid Time Off (“PTO”)

The proposed regulations confirm that employers that already provide employees with PTO will be in compliance with the Act as long as the employer’s PTO program (e.g., sick, vacation, and personal days) meets all of the requirements of the Act and the proposed regulations, including as to accrual or frontloading, permitted use, payment, payout, and carryover of earned sick leave. As the below summary indicates, however, the revision and updating of existing PTO policies will likely be necessary to meet this standard.

Benefit Year

The Act requires employers to provide employees with up to 40 hours of paid sick leave per benefit year. A benefit year may be the calendar year, or another set 12-month period. The proposed regulations state that employers must apply the same benefit to all of its employees. Once a benefit year has been established by the employer, it cannot be changed without providing detailed information in a notice to the NJ DOL Commissioner at least 30 days in advance. If the Commissioner determines that the proposed change would prevent the accrual or use of earned sick leave by an employee, the Commissioner may deny the change and impose a benefit year on the employer.

“Foreseeable” Leave and Barring Use of Leave on “Certain Dates”

The Act permits employers to require up to seven calendar days’ notice of the need to use sick leave if the need for leave is “foreseeable.” In addition, under the Act, employers may prohibit employees from using foreseeable earned sick leave on “certain dates” and require reasonable documentation if sick leave that is not foreseeable is used during those dates.

Under the proposed regulations, the need for leave would be considered “‘foreseeable’ when the employee is able to predict or know in advance that he or she will need to use earned sick leave, such as a scheduled doctor’s visit, regularly occurring medical treatment or regularly scheduled therapy appointment.” For foreseeable leave, employees would be required to make a reasonable effort to schedule the time off “in a manner that does not unduly disrupt the operations of the employer.”

Under the proposed regulations, the “certain dates” on which an employer may prohibit employees’ use of foreseeable leave or require documentation of the need for leave would be limited to “verifiable high-volume periods or special events” where the use of sick leave would unduly disrupt the employer’s operations. The proposed regulations give as an example of a “high-volume period,” for an airline industry employer, the days in and around Thanksgiving. An example of a “special event” is, for a manufacturer of retail products, the day or week of a product launch. The proposed regulations would require employers to provide reasonable notice to employees of such “certain dates.”

Accruing or Advancing Sick Leave

The Act requires employers to provide up to 40 hours of earned sick leave to employees per benefit year. Employers may (i) use an accrual method under which employees earn one hour of sick leave per 30 hours worked, up to 40 hours, or (ii) advance, or frontload, the entire 40 hours at the beginning of the benefit year. Accrual for current employees must begin October 29, 2018, i.e., the effective date.

Payout and Carryover

The proposed regulations detail the payout and carryover requirements of the Act with respect to leave that accrues and leave that is frontloaded. According to the proposed regulations, the following would apply to a payout and to carryover when the employer follows the accrual methodology:

  1. In the final month of the employer’s benefit year, the employer may provide an offer to an employee for payout of unused earned sick leave.
  2. The employee may accept the employer’s payout offer within 10 calendar days from the date the offer was made.
  3. If the employee does not accept the payout offer within 10 calendar days from the date of the employer’s offer, the employee is deemed to have declined the employer’s offer.
  4. If the employee agrees to receive a payout, the employee shall choose either a payout for the full amount of unused earned sick leave or for 50 percent of the amount of unused earned sick leave.
  5. If the employee declines a payout of unused earned sick leave or agrees to a payout of 50 percent of the amount of unused earned sick leave, the employee shall be entitled to carry forward to the following benefit year any unused earned sick leave, except that the employer shall not be required to permit the employee to carry forward from one benefit year to the next, more than 40 hours of earned sick leave.
  6. If the employee agrees to a payout of the full amount of unused earned sick leave, the employee shall not be entitled to carry forward to the following benefit year any unused earned sick leave.
  7. The payout amount shall be based on the rate of pay that the employee is earning at the time of the payout.

The following would apply to a payout and to carryover when the employer frontloads leave:

  1. In the final month of the employer’s benefit year, the employer shall either provide to the employee a payout for the full amount of unused earned sick leave or permit the employee to carry-over any unused earned sick leave, except that the employer shall not be required to permit the employee to carry forward from one benefit year to the next, more than 40 hours of earned sick leave.
  2. If the employer provides to the employee a payout for the full amount of unused earned sick leave, the employer may not use the accrual method with respect to that employee during the next benefit year.

Consistent with the Act, the proposed regulations state that employees are not entitled to a payout of unused earned sick leave upon separation of employment.

Sick Leave Payment Amount

The proposed rules for determining the required amount of payment for leave appear to have the potential for obligating employers to pay employees more when they use sick leave than when they take other PTO, and may exceed what the Act appears to require.

Although the Act is silent with respect to bonuses, the proposed regulations appear to require nondiscretionary bonuses to be included in determining an employee’s rate of pay for sick leave purposes by stating, “Where an amount of a bonus is wholly within the discretion of the employer, the employer is not required to include the bonus when determining the employee’s rate of pay for earned sick leave purposes.” Since many bonuses are not determined until the end of the year, this rule has the potential for requiring employers to make end-of-year adjustments.

In addition, the Act states that employers must pay earned sick leave “at the same rate of pay with the same benefits as the employee normally earns, except that the rate of pay shall not be less than the minimum wage required for the employee pursuant to … N.J.S.A. 34:11-56a4.” That statutory provision establishes the minimum wage rate and overtime rate, and also includes exceptions to them (e.g., colleges may pay full-time students 85 percent of minimum wage). The proposed regulations, however, go on to state that “[u]nder no circumstances during a period of earned sick leave may an employer pay an employee less than the State minimum wage rate.” The rule, as proposed, thus appears to be inconsistent with regard to the rate at which sub-minimum wage earners should be paid for sick leave. 

Non-Retaliation and No-Fault Attendance Policies

The proposed regulations reiterate and amplify the Act’s prohibition of retaliatory action against employees who take leave provided by the Act. The proposed regulations would prohibit employers from counting the “legitimate” use of earned sick leave as an absence that could subject the employee to “discipline, discharge, demotion, suspension, loss or reduction of pay or another adverse action.” The proposed regulations go on to confirm that this prohibition includes “‘no fault’ attendance policies, whereby an employee receives a point or demerit for any absence no matter what the reason, and are subject to discipline or are foreclosed from a promotional opportunity(ies) after the accumulation of a certain number of points….” The proposed regulations would not, however, prevent employers from disqualifying employees who take leave under the Act from receiving perfect attendance bonuses. As such, the proposed regulations track and are consistent with the Family and Medical Leave Act.

Recordkeeping, Exempt Employees, and Maintenance of Records

The proposed regulations expand upon the recordkeeping requirements contained in the Act and, in one important respect, offer a helpful clarification with respect to recordkeeping requirements as to exempt employees. The proposed regulations would require employers to retain, for five years, records documenting as to each employee: (i) hours worked, (ii) the amount of leave accrued or advanced, (iii) the amount of leave used, (iv) the amount paid to the employee for leave taken, and (v) the amount of leave paid out and carried over.

The Act includes the requirement that employers document hours worked by employees. The requirement does not distinguish between nonexempt employees—whose hours should be documented for wage and hour compliance—and exempt employees, for whom employers need not normally count number of hours worked. The proposed regulations address this conundrum by permitting employers to “[p]resume, solely for the purpose of calculating earned sick leave accrual, that the [exempt] employee works 40 hours per week.”

Required Notices

The proposed regulations, like the Act, require employers to post a notice that will be prepared by the NJ DOL summarizing the Act. The proposed regulations confirm that the notice will be made available on the NJ DOL’s website and further states that the posting requirement may be satisfied by posting the notice on an employer’s Internet site or intranet site if that site is for the exclusive use of employees and all employees have access.

In addition, employers must provide each employee with a copy of the notice: (i) within 30 days of its issuance, and thereafter (ii) upon hire and (iii) upon the first request of an employee. The proposed regulations would permit distribution by email.

Independent Contactors

Of interest, the proposed regulations contain a provision expressly addressing independent contractors and stating that the “ABC test” will apply in determining whether an individual is an independent contractor or an employee. As we recently discussed in a previous Act Now Advisory, New Jersey is turning up the heat on employers that misclassify employees as independent contractors, in an apparent effort to, among other things, increase state revenues. The potentially stiff penalties for failing to provide paid sick leave in accordance with the Act, as well as for other violations, is further indication that the state is continuing to heighten the risks and exposure arising from the failure to strictly comply with the ABC test when classifying workers as independent contractors.

Collective Bargaining Agreements (“CBAs”)

CBAs are exempted from the Act, to an extent. The proposed regulations confirm that, until a CBA expires, the Act does not apply to employees who, as of the October 29, 2018, effective date, are covered by the CBA. Moreover, employees or their representatives may waive rights under the Act during negotiations of a CBA.

Proposed Regulations’ Comment Period

The NJ DOL will conduct a public hearing on the proposed regulations on November 13, 2018, at the NJ DOL’s offices in Trenton. In addition, written comments may be submitted by December 14, 2018, to David Fish, Executive Director of DOL’s Office of Legal and Regulatory Affairs.

What New Jersey Employers Should Do Now 

  • Request an opportunity to speak at the November 13, 2018, hearing or submit written comments, if you have comments, objections, or suggestions with respect to the proposed regulations.
  • Determine whether you will follow the accrual or frontloading methodology.
  • Establish recordkeeping procedures that comply with the Act and proposed regulations.
  • Prepare or revise PTO policies to ensure compliance with the Act and proposed regulations. Make sure such policies explain:
    • the benefit year (i.e., the calendar year or another 12-month period);
    • whether sick leave accrues or is advanced;
    • the waiting period for the use of leave, if any (up to 120 days is permitted);
    • the procedures for requesting leave in advance and when leave is unforeseeable, including notification and documentation requirements and “certain dates” on which foreseeable leave may be prohibited;
    • the carryover and payout of unused leave, including at the time of separation from employment;
    • if applicable, that employees who exhaust PTO or paid vacation time will not be entitled to additional paid sick leave; and
    • that employees will not be retaliated against for utilizing paid sick leave.
  • Provide training to management, payroll, and human resources staff on the requirements of the Act and proposed regulations.
  • Upon the NJ DOL’s issuance of its sick leave notice, be prepared to:
    • post it on the company’s intranet or a dedicated employee Internet site;
    • post it with the company’s other employment notices (i.e., in a conspicuous place at each of your work places);
    • distribute it to all employees in hard copy or by email;
    • provide it to all new employees upon hire; and
    • provide it to any employee upon request.
  • Review independent contractor arrangements to confirm that such individuals are properly classified.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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