The Illinois general assembly kicked off 2023 off by passing the Paid Leave for All Workers Act (the “Act”). Governor Pritzker is expected to sign the bill later this year. Once signed, the Act will go into effect on January 1, 2024, and will make most Illinois private-sector employees eligible for up to 40 hours of paid time off per year.
Under the Act, most Illinois employees will be eligible for a minimum of 40 hours of paid leave, although employers are able to provide more generous benefits. Employees must be allowed to use paid leave after 90 days following the commencement of their employment, unless an employer permits them to utilize the paid leave earlier.
Employers may use two alternative methods of accrual to comply with the Act. One option is to provide 40 hours of leave as a lump sum, which would be frontloaded on the first day of employment or on the first day of a designated 12-month period. A second option is to use an accrual method. For the frontloading option, an employer could, for example, award each employee five days (40 hours) of paid leave on January 1st of each calendar year or award five days (40 hours) of leave upon hire (so long as the leave is designated by the employer in writing at the time of hire). Under the accrual option, the paid leave would accrue for full-time employees at the rate of one hour of paid leave for every 40 hours worked per year. Part-time employees also accrue the paid leave at the same rate of one hour of paid leave for every 40 hours worked per year. However, part-time employees might not accrue the full 40 hours of leave provided by the Act by the end of the year, meaning they accrue fewer hours of leave because of the number of hours they have worked. For example, if a part-time employee only works 15 hours per week for 52 weeks in a year, then the employee will only accrue 19.5 hours of the paid leave annually. The accrual method must also be provided or listed in the employer’s written paid leave policies, if that option is selected.
A uniquely employee-friendly aspect of the Act is that employees can unilaterally designate the number of paid leave hours to be used and do not have to give a reason for taking the leave. However, employers can set a reasonable minimum increment of taking the leave (no more than two hours per day). Further, employers are not permitted to require documentation or certification from the employee related to the need or reason to take leave. Further, employers cannot require employees to search for, or find, replacement workers in order to take the applicable leave. Employers may require up to seven calendar days’ prior notice of foreseeable leave. If the leave is not foreseeable, employees must provide notice as soon as practicable. If an employer intends to require notice of leave under the Act when leave is not foreseeable, it must provide a written policy (i.e. handbook policy) that contains the procedures for an employee to provide such notice.
Additional Important Act Considerations and Requirements
- Coverage: Who is an Employer and Employee under the Act?
- Employer: Containing the same definition as in the Illinois Wage Payment and Collection Act (“IWPCA”), the Act applies to almost all employers in Illinois, including state and local government and governmental agencies.
- Employee: Containing the same definition as in the IWPCA, the Act applies to almost all employees.
- Employee Payments on Leave: When on leave, employees must be paid their regular hourly rate of pay. If an employee is paid gratuity and/or commissions, then they must still be paid at least the full minimum wage for the jurisdiction, or their hourly rate while on leave. Employers are advised to follow all federal and state pay requirements, even while an employee is out on leave.
- Carry-Over: If choosing the accrual method, an employees’ unused, but accrued paid leave under the Act will carry over annually for up to 40 hours of paid leave in a designated 12-month period. For Employers that choose the frontload option, the employer will not be required to carry over employee accrued, but unused, paid leave to the following 12-month period.
- Leave and Termination of Employment: Under current Illinois law (the IWPCA) an employer is required to pay out earned vacation leave at the end of the employment relationship. Under the Act, employers do not need to pay unused paid leave provided the employer has not credited any paid leave to an employee’s paid time off bank or employee vacation account. In addition, if an employee leaves and returns within 12 months, the employer must restore any earned paid leave.
- Retaliation and Adverse Actions Against Employees: The Act prohibits employers from taking adverse action against employees for: exercising their rights under the Act; opposing practices the employee believes to be in violation of the Act; or supporting others’ exercise of rights under the Act. Employees also cannot consider the use of leave under the Act in making discipline, promotion, or evaluation decisions regarding employees.
- Collective Bargaining Agreements (“CBAs”): The Act will not affect any CBA in effect as of January 1, 2024. However, subsequent CBAs will need to either comply with the Act or include a specific waiver of the CBA terms (set forth in an explicit agreement), subject to certain industry-specific requirements.
- Conflicts with Chicago and Cook County Paid Sick Leave: The Act does not preempt the Chicago Minimum Wage and Paid Sick Leave Ordinance or the Cook County Earned Sick Leave Ordinance. The Act specifically states that it “shall not apply to any employer that is covered by a municipal or county ordinance that is in effect on the effective date of this Act that requires employers to give any form of paid leave to their employees, including paid sick leave or paid leave.”
- Notice and Recording Requirements: The Act requires employers to post a notice that will be prepared by the Illinois Department of Labor (“IDOL”) in an area of the workplace where other notices are customarily posted (i.e. DOL, IDOL, FLSA, FLMA and other notices, etc.) that summarizes the requirements of the Act. The Act also requires employers to create records documenting hours worked, leave accrued and taken, and remaining paid leave balances. The records must be maintained for three years and grant the IDOL access when requested. Failure to comply with the recordkeeping requirements subjects employers to a penalty of $2,500 per offense.
- Employee Remedies: The Act does not appear to provide a private right of action. The IDOL is responsible for administering and enforcing the Act. Employees may file complaints with the IDOL within three years of the alleged violation. Employers found to violate the Act are subject to a civil penalty of $2,500 for each separate offense, and other actual damages, compensatory damages, attorneys’ fees/costs, and civil penalties, as well as being subject to equitable relief.
Key Takeaways, Practical Implication, and Next Steps for Employers
The Act poses significant compliance considerations for Illinois employers. Therefore, employers should review and prepare to amend their policies, as needed, and provide guidance to their employees as soon as possible.
IDOL is also likely to issue regulations once the Act is enacted. Employers should begin assessing their compliance under the Act before the law goes into effect. In addition, human resources, management, and other supervisory employees should be trained in the requirements and implementation of the Act to ensure a smooth transition process for paid leave in 2024.
Dykema will continue to monitor any further guidance and additional developments under the Act. If you have any questions about the Act, please contact the authors of this article or a member of Dykema’s Labor and Employment team.