Employers have until Oct. 15, 2023 to ensure that their safe and sick leave policies remain compliant with New York City law after the New York City Department of Consumer and Worker Protection (DCWP) on Sept. 15, 2023 issued a Final Rule related to the City’s Earned Safe and Sick Time Act (ESSTA) that amends prior ESSTA rules.

The amendments include clarification on how to calculate employer size in order to determine leave requirements, what constitutes a New York-based employee for the purposes of the act and when it is permissible to ask employees to document the need for safe and sick leave.

The NYC Earned Safe and Sick Leave Law

Under the ESSTA, employers must provide New York City employees time off to care or obtain treatment for themselves or a family member, or to seek legal and social services assistance or other safety measures if the employee or a family member is the victim of any act or threat of domestic violence or unwanted sexual contact, stalking or human trafficking.

Employers must provide safe and sick leave as follows:

• All employers with fewer than five employees and net income of less than $1 million dollars in the last tax year must provide workers with at least 40 hours of unpaid safe and sick leave per calendar year.
• Employers must provide at least 40 hours of paid safe and sick leave per calendar year if any of the following are true:
  • Employ fewer than five workers and had net income of more than $1 million dollars in the last tax year.
  • Employ one or more domestic workers
  • Employ between five and 99 employees, regardless of the business’s net income.
• Employers with 100 or more employees must provide at least 56 hours of paid safe and sick leave per calendar year.

Safe and sick leave accrues at a rate of one hour for every 30 hours worked, up to the maximum amount set forth above. Employees begin to accrue safe and sick leave on their first day of employment and may use such leave as soon as it accrues. Alternatively, employers may utilize a frontload system in which employees are provided with all of their safe and sick leave at the beginning of each calendar year.

Clarification on Employer Size

Though the amount of sick leave is premised on employer size, the statute itself — and subsequent city guidance — provided little to no instruction as to how to calculate employer size.

The Final Rule attempts to clarify this. An employer’s size is determined by its total number of employees (both full-time and part-time) nationwide — not just those working in New York state or New York City. Significantly, this tally includes employees who are jointly employed by more than one employer, regardless of whether the individual appears on the employer’s payroll.

For example, Hospitality Group A owns several restaurants in New York City and several restaurants in Boston, Washington D.C. and Los Angeles. The restaurants are operated by various companies that are owned and controlled by Hospitality Group A.

To determine the amount of safe and sick leave that must be provided to employees in New York City, Hospitality Group A must count the total number of employees in all of its restaurants in New York City, Boston, Washington D.C. and Los Angeles. This is because, per the Final Rule:

• All employees nationwide must be tallied
• Although Hospitality Group A does not manage the day-to-day operations of these restaurants, it legally owns (and substantially controls) the subsidiary companies that do, and thus these companies are likely to be considered joint employers of the workers in question.

If the total number of employees is between five and 99 employees, then New York City employees are entitled to accrue at least 40 hours of paid safe and sick leave per calendar year. If the total number of employees is 100 or more, then they are entitled to accrue at least 56 hours of paid safe and sick leave per calendar year.

If an employer grows in size and passes the 99-employee “threshold,” then it must immediately allow its employees to accrue at least 56 hours in the calendar year in question. Alternatively, if an employer shrinks in size and falls under the 100 or more employee “threshold,” then it must still allow its employees to accrue at least 56 hours in the calendar year in question. However, the employer is then entitled to reduce the amount of safe and sick leave provided to employees to 40 hours in the next calendar year.

Clarification on Who Is a ‘New York City Employee’

It came as no surprise that the COVID-19 pandemic raised questions about who is a “New York City employee,” particularly in light of the growing popularity of remote work. The Final Rule notes that an employee is entitled to safe and sick leave under the ESSTA if any of the following are true:

• Physically perform the work in New York City, regardless of where the employer is located
• Perform remote work while physically located in New York City, regardless of where the employer is located
• Primarily perform work outside of New York City, but regularly perform (or are expected to regularly perform) work within New York City

However, an employee who only performs work (including remote work) while physically located outside of the city is not considered a “New York City employee” and is thus not entitled to safe and sick leave under the ESSTA. For example, an employee who lives in Florida and works from home for a company based in Manhattan is not considered a “New York City” employee even if they attend virtual meetings with colleagues in Manhattan all day.

Can I Ask Employees for Documentation Supporting the Need for Safe and sick Leave?

Currently, an employer may not ask an employee to provide documentation supporting the need for the use of sick and safe time if the leave lasts less than four consecutive workdays. However, an employer may require an employee to provide documentation supporting the need for sick and safe leave if the leave lasts four or more consecutive workdays. Such documentation may include a note from a clinical social worker, mental health counselor or other health care provider.

The Final Rule clarifies that an employer is prohibited from requiring such documentation before the employee returns to work. Additionally, if an employer requests such documentation it must give the employee at least seven days to submit the documents. Further, if the employee incurs any expenses to obtain the requested documentation, the employer must reimburse the employee for any such cost.

What Do I Have to Pay an Employee for Safe and Sick Leave Use?

The ESSTA requires an employer to pay safe and sick time at the employee’s regular rate of pay at the time the leave is used. As a reminder, New York City’s current minimum wage of $15 an hour is set to increase on the following dates:

• January 1, 2024: $16/hour
• January 1, 2025: $16.50/hour
• January 1, 2026: $17.00/hour

Employers that have tipped employees are reminded that they cannot take the tip credit for hours that the employee is out on safe and sick leave. For more information on the upcoming minimum wage increases (including those outside of the city), please see our alert here.

Notice of Safe and Sick Leave

An employee’s pay stub must inform the employee of the amount of safe and sick time accrued and used during the relevant pay period and the total balance of the employee’s accrued safe and sick time available for use.

As a reminder, an employee is entitled to carry over into the next calendar year all accrued but unused sick & safe time (unless the employer uses a frontload method). However, depending on its size, the employer may cap the employee’s use of safe and sick leave to 40 hours or 56 hours per calendar year. Should an employee accrue a safe and sick time balance that exceeds the amount the employee may use in a calendar year, the pay stub must inform the employee of the amount of safe and sick time available for use in the current calendar year.

Must I Pay Out Accrued But Unused Safe and Sick Leave Upon Separation of Employment?

As long as an employer’s written safe and sick leave policy clearly states that an employee will not receive payment for accrued but unused safe and sick leave upon separation of employment — whether voluntary or involuntary — there is no obligation to pay out such leave under the ESSTA. If an employer wishes not to pay out accrued but unused safe and sick leave, it should ensure that its written policy appropriately declares this.

Penalties

Employers that fail to adhere to the ESSTA will incur costly fines. If the city determines that an employer violated the ESSTA, it may impose a range of penalties depending on the severity of the infraction. Fines vary from $250 per violation to $500 per employee that is covered under a non-compliant safe and sick leave policy. Employers may also be liable for back pay if an employee is disciplined or terminated for their lawful use of safe and sick leave.

While the above penalties are not new, the Final Rule states that there will be a “reasonable inference” that the employer is not in compliance with the ESSTA if it fails to maintain or distribute a written safe and sick leave policy and maintain adequate records of employees’ safe and sick time use and balances.

Employers are strongly urged to review and revise their safe and sick leave policies to ensure that they are compliant with the above changes ahead of the October 15, 2023 effective date. This includes confirming that employees are provided with the correct amount of safe and sick leave they are due under the Final Rule’s employer size calculation formula.

Employers should know that the ESSTA allows them to implement a Paid Time Off (PTO) policy in lieu of a safe and sick leave policy as long as it meets or exceeds the law’s leave amount, use, accrual, and carryover requirements. Given that the Final Rule will require many employers to increase the amount of safe and sick leave provided to employees based on the above calculation, employers that implement both a safe and sick leave policy and a PTO policy that enables employees to take additional time off for reasons not covered by the ESSTA — such as vacation — may want to consider abandoning their safe and sick leave policy and only offer employees time off pursuant to a PTO policy that complies with the ESSTA.

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