Massachusetts Attorney General Issues Final Earned Sick Leave Regulations With Substantial Revisions

As many of you are aware, the July 1, 2015 effective date of the Massachusetts earned sick leave law is looming. In summary, the new law provides that employers of 11 or more employees must provide their Massachusetts employees with job-protected paid sick leave accrued at a rate of 1 hour for every 30 hours worked, while smaller employers must provide the same amount of unpaid sick leave. The law permits employees to take sick leave for the following purposes: (1) an employee’s own physical or mental illness or injury that requires care; (2) to care for the employee’s immediate family member suffering from physical or mental illness or injury; (3) for the employee’s own or employee’s immediate family member’s attendance at routine medical appointments; and (4) to address the psychological, physical, or legal effects of domestic violence against the employee or the employee’s child. The Massachusetts Attorney General, who is charged with implementing the new law, issued proposed regulations in April of 2015 and a “safe harbor” allowing certain employers with existing paid time off (PTO) policies to delay full implementation of the law until January 1, 2016.

After a lengthy and well-attended commentary period, the office of the Massachusetts Attorney General issued final regulations regarding the new Massachusetts sick leave law on June 19, 2015. The final regulations significantly revise the proposed regulations and address some of the many concerns voiced by the business community. The final regulations include many needed clarifications and several employer-friendly provisions intended to allow employers to address employee fraud. 

Summary of Key Provisions of the Final Regulations

The changes from the proposed regulations are lengthy and detailed. We have summarized below some of the most significant new provisions and/or changes in the final regulations.

Sick Leave Runs Concurrently. The final regulations provide that earned sick time may run concurrently with other forms of statutory time off and that employers may require that other forms of unpaid statutory leave run concurrently. The proposed regulations had previously stated that earned sick time was “in addition” to other forms of leave.

How Sick Time Is Paid. The final regulations clarify that the rate paid for earned sick time for hourly employees is at the employee’s regular hourly rate and excludes overtime compensation, holiday pay, or other premium pay (but it would include a shift differential, if applicable).

• For employees paid on a salary basis, the final regulations state that their regular hourly rate is determined by dividing the total earnings in the previous pay period by the total hours worked during the previous pay period. However, to address concerns about how this provision would apply to employees exempt from overtime under the Fair Labor Standards Act (FLSA), the regulation now also states that those employees shall be assumed to work 40 hours per week for purposes of this calculation, unless they have a normal work week that is less than 40 hours (this is the same assumption used for purposes of accrual).
• For tipped employees who ordinarily receive the service rate (currently $3.00 per hour plus tips), the regular hourly rate for sick time purposes is the effective minimum wage (which is currently $9.00 per hour).

Transferred Employees. The final regulations provide that an employee who transfers to a Massachusetts workplace will begin to accrue earned sick time upon the first day the employee works in Massachusetts. Employees who transfer to a job outside of Massachusetts do not accrue additional earned sick time following the transfer, but are entitled to the earned sick time that was accrued previously.

Earned Sick Time Does not Accrue for Non-Working Time. The final regulations state that earned sick time is accrued only on working time, not during PTO, vacation, or other non-working paid time.

Piece Work/Fee for Service. The final regulations state that employees who are engaged on a piece-work or fee-for-service basis accrue time based on a reasonable measure of the actual time they have worked.

Earned Sick Time Is Capped. The final regulations clearly confirm that sick leave accrual and year-end carryover is capped at 40 hours annually—in other words, once an employee accrues 40 hours in any year, he or she does not accrue further leave regardless of additional worked hours and may only carry over a maximum of 40 hours into the next year. Also, the statute and regulations only entitle an employee to use up to 40 hours per year.

• The final regulations add a new provision that states that employers may create a policy that halts continued accrual if the employee has “banked” 40 unused sick time hours, but state that an employer must permit the employee to start accruing sick leave again if the employee uses earned sick time and reduces the “bank” to less than 40 hours. While seemingly inconsistent with the 40-hour cap, this provision may be intended to address circumstances in which an employee carries over some amount of time from a prior year, but would reach 40 hours in his or her “bank” before accruing the annual maximum in the new year. Thus, in this situation an employer could elect to have a policy that delays any further accrual until the employee dips below 40 hours of unused time. 

Minimum Increments of Use. The new regulations implement a significant change from the proposed version by stating that the first hour taken for earned sick time must be in a minimum one-hour increment, but any time after that first hour may be taken in one-hour increments or the minimum time increment the employer uses to measure absences or time. As a practical matter, it appears that, as a result, absences in excess of one hour should be measured by the lesser of the two measures (one hour or the smallest measure of time).

Replacement Employees. The final regulations clarify that if an employer must hire a replacement or call in another employee due to an employee’s use of sick time, the employer may require the employee who is on leave to use an equal number of hours of sick time that the replacement employee works, up to a full shift. If the absent employee does not have enough paid sick time to cover that entire amount, the employer must provide unpaid time off for the remainder.

New Provisions to Deter Employee Abuse. In response to requests by the business community, the final regulations include several new provisions that protect employers and are designed to minimize employee abuse of sick time. Under these new provisions:

• Sick time may not be used at any time that the employee is not scheduled to be at work.
• An employee may not use earned sick time as an excuse to be late for work unless the absence was authorized under the law.
• An employee may not accept a specific shift assignment with the intention to call out sick for all or part of the shift.
• Employers may discipline employees for misuse of sick leave if they engage in fraud or abuse inconsistent with leave allowable under the law.
• Employers may discipline employees if they engage in a “clear” pattern of taking sick leave on days before or after a weekend, vacation time, or holidays, unless employees provide verification of authorized use. The regulations are unclear on what type of verification may be required (The regulations also allow employers to require “verification” in this circumstance, though the nature of that verification is unclear.)

End-of-Year Payouts. Although employers are not required to pay out earned sick time at the end of any year (or upon termination of employment), the final regulations contain detailed rules on how year-end payouts must be handled by employers that elect to do so. Specifically, if an employer elects to pay out employees 16 or more hours (up to 40 hours maximum) of earned sick time at the end of the year, the employer must provide at least 16 hours of unpaid time to be available for use at the beginning of the following year (earned paid time can then be credited against that unpaid time once it is accrued). When the employer pays out fewer than 16 hours, it must make available an equivalent amount of unpaid time to the employee at the beginning of the following calendar year for use until the employee accrues that earned sick time (and the earned sick time can similarly be credited against the advanced sick time once it is accrued).

Break in Service Rules. The final regulations substantially revise the initial proposed break in service regulations to address employers’ concerns regarding how seasonal employees can use and maintain accrued time following a break in service. The final regulations outline a schedule based on the amount of time accrued and the length of the break in service, replacing the requirement that all accrued time must be maintained for any employee with a break of service of less than 12 months. The schedule provides that

• If the break in service is less than 12 months, employees are not required to restart the 90-day vesting period.
• Employees with a break in service shorter than four months maintain the right to use any previously accrued earned sick time.
• Employees with a break in service of more than 4 months but less than 12 months maintain the right to use accrued earned sick time if they have 10 or more hours of accrued and unused earned sick time.

Employer Size Calculations. The final regulations create a new method of identifying employer size for purposes of determining whether earned time is paid or unpaid. Under the new method, the size of an employer is determined by

• calculating the average number of employees from a prior “benefit” year—which is usually a calendar year but may be a fiscal, tax, or other year period used by the employer— to determine whether the employer had 11 or more employees, therefore triggering employers’ paid sick time obligation;
• by including temporary employees provided by a staffing firm in the calculation of the number of employees; and
• by requiring that an employer count all employees, regardless of whether they are in or outside of Massachusetts, eligible for earned sick time, or full-time, part-time, seasonal, or temporary. (This provision remains substantially similar to the size-calculation provision in the proposed regulations.)

New Employee Notice Obligations. Among the many revisions, the final regulations implement far more stringent notice obligations on employees (and some provisions protective of employees), including specifically

• requiring employees to provide notice of the duration of the leave for a multi-day absence, if known, or, if not known, daily notice of the leave, unless circumstances make providing such notice unreasonable; and
• allowing employers to have a policy that requires seven days’ advanced written notice for a foreseeable or pre-scheduled use of sick time, but precluding application of such a policy if the employee learns of the need to be absent in a shorter period.

More Stringent Documentation Requirements for Employees. When documentation may be required, the regulations make certain changes that are beneficial to employers:

• The regulations allow an employer to require medical (or similar) certification of leave in a broader range of circumstances. In particular, the final regulations now allow employers to require documentation from a health care provider (or other qualifying documentation related to domestic violence issues) of the need for leave under the following conditions:
  • The leave exceeds 24 or more consecutively scheduled work hours.
  • The leave exceeds 3 consecutive days of scheduled work (even if the scheduled work period is less than 24 hours).
  • The leave occurs after 4 unforeseeable and undocumented absences within a 3-month period (3 such absences if the employee is age 17 or younger); or
  • The leave occurs within the 2 weeks prior to an employee’s scheduled termination of employment (except for temporary workers).
  • The regulations shorten the time period within which employees must provide the certification documentation to 7 days from 30 days, unless the employee could show good cause for a delay.
  • The regulations permit employees who do not have health care coverage to provide employers with a self-provided written verification (not from a doctor). The Attorney General has stated that it will provide a model form for this purpose.

Anti-Fraud Provisions. Most employers will welcome the several new tools that the final regulations provide to combat employee misuse of earned sick leave.

• The regulations allow employers to require employees to provide verification that they are using sick time for a purpose permitted by law (but not require any detail about the nature of the reasons for the leave), for any increment of sick leave used. The Attorney General suggests use of its model form for this purpose.
• The regulations allow employers to recoup paid earned sick time from an employee who fails to comply without justification with documentation requirements. Employers that intend to recoup sick time must notify employees of this practice in their policy.
• The regulations allow smaller employers to deny the future use of the equivalent amount of unpaid accrued sick leave by an employee who fails to provide required documentation. (But in this circumstance the employer may not take any other adverse action against the employee.)
• The regulations allow employers to require fitness-for-duty certifications if they are “customarily required,” if they are consistent with industry practice or state or federal safety requirements, and if reasonable safety concerns exist regarding the employee’s ability to perform duties.

New Provisions Regarding Substitution of Employer Leave Policies. The regulations include several more employer-friendly provisions. Among these are a number of provisions that give employers flexibility in providing earned sick leave to employees.

• Employers may provide for varying levels of leave for different classes of employees, as long as all employees receive the minimum statutory leave.
• Employers may provide a lump sum of 40 hours of leave to all employees at the beginning of each year and, if an employer does so, it need not track accrual or allow rollover. Notably, this provision applies to all employees (whether full-time, part-time, etc.) and does not appear to allow employers to pro-rate the 40-hour lump sum based on part-time status.
• The regulations permit employers that have unlimited sick time policies to not track accrual or allow any rollover;
• Employers that provide other forms of PTO or vacation time are not required to provide additional paid sick time if employees can use the PTO or vacation time for statutory sick leave on the same terms and conditions provided under the sick leave law. Further, if an employee exhausts the time by using it for purposes other than sick leave (i.e., vacation or PTO), the employer need not grant the employee additional sick time, provided it has given employees notice that additional sick time will not be granted in such circumstances.
• The regulations include provisions designed to assist employers that prefer not to track accrual, which establish a pro rata lump sum accrual schedule based on average working hours.

Safe Harbor Codified and Revised Again. The final regulations codify the revised “safe harbor” released by the Attorney General that allows certain employers with existing PTO plans to delay implementation of all provisions of the law until January 1, 2016, provided the employers meet certain mandatory requirements. The final regulations include further minor modifications to the most recent iteration of the “safe harbor.” Specifically, the regulations state that an employer eligible for safe harbor use may choose to provide full compliance for some employees and utilize safe harbor provisions for others. Also, the final regulations continue the requirement that “safe harbor” employers must allow unused amounts of 2015 leave to roll over into 2016, but rollover is not required if the employer adopts a policy that provides lump sum allocations that make rollover unnecessary. 

Notice Obligations Changed. The final regulations revise the employer notice requirements as follows:

1. The new regulations require employers to post the notice provided by the Attorney General in a conspicuous place in the workplace.
2. The new regulations require employers to do one of the following:
   1. provide a copy of that notice to each employee (in hard or electronic copy) or
   2. include the employer’s policy on earned sick time or a permissible substitute plan in an employee handbook or manual.

Conclusion

The new regulations help explain the many ambiguities in the law and allow employers to take steps to avoid employee abuse. Although the final regulations provide needed clarification and are far more employer-friendly, implementing the new paid sick leave law is no small task, given its complexity and the fact that the final regulations were issued with just seven business days before the earned sick leave law takes effect. As such, it may be prudent for employers to consider adopting the safe harbor provision and delaying full implementation until January 1, 2016. This strategy would give employers time to gain further clarification.