42 | 2025 Cal-Peculiarities ©2025 Seyfarth Shaw LLP www.seyfarth.com Calculating pay rates for sick time. While an employer may calculate sick pay for exempt employees “in the same manner as the employer calculates wages for other forms of paid leave time,”154 employers must choose between two different methods of calculating PSL for nonexempt employees. The first method entails “dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.”155 The alternative method is to calculate sick pay using “the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time, whether or not the employee actually works overtime in that workweek.”156 In other words, the pay rate may be calculated by using the “regular rate” of pay as though calculating overtime, inclusive of incentives, shift differentials, etc.157 On October 11, 2016, a DLSE opinion letter declared that all commissioned employees, whether or not exempt from overtime requirements, must be paid using the 90-day method: dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked during the full pay periods within the prior 90 days of employment.158 Payout of unused PSL. Employers need not pay out available, unused PSL upon employment separation. An employer must, however, restore to a rehired employee any unused PSL if the employee is rehired within one year of the separation.159 However, if an employer uses PTO to comply with the PSL law, then any accrued, unused PTO must be paid out upon termination of employment and need not be restored upon re-hire.160 Posting. The PSL law includes a posting requirement (see § 9.1).161 Also, employers must include information about PSL rights in the Wage Theft Prevention Act Notice that employers must provide to nonexempt employees upon hire (see §§ 9.2.2, 16.1.2).162 In addition, the amount of PSL an employee has available must appear on either the employee’s itemized wage statement (see § 16.3) or in a separate document provided to the employee on the designated pay date.163 Record-keeping. The PSL law requires employers to keep records, for three years, documenting the hours worked and the PSL accrued, and to make those records available for inspection by the Labor Commissioner or the employee (see § 11).164 CBA exemption. The PSL law previously offered a complete exemption for employees covered by a collective bargaining agreement (CBA) outside the construction industry, provided the CBA met certain specific requirements. As of January 1, 2024, however, no CBA is completely exempt from the requirements of the PSL law. As before, the definition of “employee” under the PSL law excludes any employee who is “covered by a valid collective bargaining agreement if the agreement expressly provides for the wages, hours of work, and working conditions of employees, and expressly provides for sick days or a paid leave or paid time off policy that permits the use of sick days for those employees, final and binding arbitration of disputes concerning the application of its paid sick days provisions, premium wage rates for all overtime hours worked, and regular hourly rate of pay of not less than 30 percent more than the state minimum wage rate.”165 However, as of January 1, 2024, such “CBAexempted” employees (1) must be allowed to take sick leave for all of the reasons specified in the PSL law, (2) cannot be required to find a replacement worker as a condition of taking paid sick leave, and (3) are protected by the law’s anti-retaliation provisions.166 This change impacts CBA attendance provisions that apply instances of absence for use of available paid sick time. Co-existence with local ordinances. As of January 1, 2024, the California PSL law preempts specific provisions of local PSL ordinances, including requirements regarding the lending of paid sick leave, paystub statements, methods of calculating sick pay, employee requirements to provide notice of foreseeable paid sick leave use, timing of payment of paid sick leave, and whether payment of sick leave is required upon termination.167 If a local ordinance contradicts the state law on these topics, the California PSL law requirement applies rather than the local law. However, the local PSL ordinances already in place in several California municipalities generally do not contradict the California PSL law on these specific points. Accordingly, the way remains mostly clear for California
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