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Expanding “Paid Leave”: New Illinois Law Broadens Key Employee Benefit

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Mandatory paid time off, for any reason? Yes, at least in certain states. The Illinois legislature has followed the lead of Nevada and Maine, becoming the third state to impose such requirement on employers. The new Paid Leave for All Workers Act (“Act”), effective January 1, 2024, provides potent reminders of both burgeoning paid leave employee rights along with increasingly complex employer obligations. Here’s what responsible nonprofit employers need to know and do.

Applicability: The Act applies broadly to nearly all employees in Illinois – regardless of employer size. A few exceptions exist such as for railroad workers, school district employees, park district employees, and college students employed on a short-term basis. But that’s it! For covered employees, the Act applies to those working part-time or full-time, and non-exempt or exempt. Additionally, the Act’s paid leave benefits begin accruing for each employee upon the later of (1) commencement of employment or (2) the January 1, 2024, effective date of the Act. So now is a good time for Illinois employers to start planning!

Any Reason: The Act’s paid leave is for any reason! No substantiation or other proof is needed, and the mandatory leave is not limited to any particular purpose. Employees are entitled to the paid leave, whether for vacation, illness, or other personal reasons, period. That is quite a dramatic shift from standard sick leave policies and laws, such as Illinois’ prior “Employee Sick Leave Act” that was both limited in purpose (i.e., only illness, injury, or medical appointments for the employee or the employee’s family member) and subject to verification.

Amount: The Act requires a minimum of 40 hours of paid leave during a 12-month period. Such benefit accrues pro rata at a rate of 1 hour of paid leave for every 40 hours worked – up to 40 hours (unless the employer chooses to provide more leave). Full-time exempt employees are deemed to work 40 hours each week.

Potential Monetary Value: Employers may credit such mandatory paid leave as part of their employees’ vacation or paid time off. In that case, an employee with any accrued but unused leave will have the legal right to receive the monetary value of such leave. Otherwise, however, the Act does not entitle the employee to such compensation upon employment termination.

Potential Rollover: Employers may impose a “use-it-or-lose-it” requirement during an employee’s tenure – under certain conditions. As set forth in the Act, “employers that provide the minimum number of hours of paid leave to an employee on the first day of employment or the first day of [a specified]12-month period [e.g., a calendar year] are not required to rollover paid leave from 12-month period to 12-month period and may require employees to use all paid leave prior to the end of the benefit period or forfeit the unused paid leave.” Note too that the Act provides that employers are never required to provide more than 40 hours of paid leave in a 12-month period, although they may agree to do so.

Front-loading: Following such rollover considerations, the Act appears to encourage employers to front-load this mandatory paid leave benefit. In other words, so long as employers front-load the required amount of paid leave each year (e.g., 40 hours for full-time employees), they may choose the “use-it-or-lose-it” option or to allow employees to rollover some or all of their paid leave. That’s an important incentive!

Coordination with Other Paid Leave: Significantly, the Act allows employers to have policies combining this mandatory paid leave with its own paid time off and vacation policies. In other words, employers may credit the legally required paid leave to their employees’ earned paid time off or vacation leave. For example, an employer who provides a week of earned vacation time each year to an employee will satisfy the Act’s requirements. Note, however, that such benefit will then have a monetary value upon employment termination, if it is accrued but unused (as is currently required under applicable law). Note too that other paid sick leave laws may apply, such as per Chicago’s ordinance, and such leave may similarly be credited to employers.[1]

Usage: Employees are legally required to give only 7 days’ advance notice, and shorter notice is allowed if the paid leave is “not foreseeable.” In that case, employees are required to “provide such notice as soon as is practicable after the employee is aware of the necessity of the leave.” Both conditions are quite generous for employees! Additionally, employees may take their personal leave in full-day or smaller increments (e.g., half-day, or in as little as two hours). Employers however may require for new hires to limit usage of their accrued paid leave for up to 90 days following their start date.

Employer Compliance: For optimal compliance with the Act, employers should provide written notice to their employee about all paid time off benefits along with any changes. Such notice should be provided both through posting in a visible location and a written employee policy. Consequently, it may be quite important for Illinois employers to check on their employment postings and policies now, and then update them in light of the Act. And if an employer has not already developed an employee handbook - whether basic, extensive, or somewhere in between – now may be the time! Note too that the Act imposes record-keeping requirements (for paid leave accrual, use, and balances) as well as penalties for non-compliance.

Multi-State Employers: What should employers do with employees in various states including Illinois? The legal compliance required across a patchwork of state laws may be daunting![2] As a best practice, multi-state employers may wish to take a “least common denominator” approach, allowing for generous paid leave that complies with all states in which they currently have or anticipate having employees. Some states may warrant special consideration, such as California since it has some more extensive benefits than many other states.

Employee Handbooks: Does your nonprofit have an employee handbook? If not, now’s the time to seriously consider developing such resource, whether the organization operates in Illinois or elsewhere. If yes, updating the organization’s employee handbook may be warranted, to fully address applicable new legal requirements and related best practices - and perhaps with addenda addressing state-specific information for employees by location. Accompanying written guidance and accompanying training for supervisory personnel may be helpful too, to similarly satisfy applicable legal requirements and to promote optimal legal compliance.

[1] For more information about Chicago’s sick leave ordinance, please see our law firm’s blog article, Paid Sick Leave Trending – Chicago and Beyond.
[2] For legal compliance aspects affecting multi-state employers, please see our law firm’s blog article, Legal Compliance for Out-of-State Remote Workers.

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