24 th Annual Illinois Statewide APA Payroll Conference

24 th Annual Illinois Statewide APA Payroll Conference “Be a Payroll Champion” Sick Leave in Chicago, Cook County and Illinois & Other Compliance Matters By Larry Grudzien Attorney at Law 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 1

Sick Leave in Chicago, Cook County and Illinois 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 2

Introduction �In October 2016, Cook County passed an ordinance requiring employers in the County to provide eligible employees with certain paid sick leave benefits. �The ordinance largely mirrors a recent amendment to the Chicago Minimum Wage Ordinance, which was passed in July 2016. �Both are scheduled to go into effect on July 1, 2017, and a new Illinois law pertaining to sick pay benefits is set to take effect on January 1, 2017. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 3

Introduction �Cook County’s ordinance applies to employees throughout the county except where a home rule municipality has passed its own sick leave law. �Local municipalities with home rule can potentially opt out of the ordinance. -106 have opted out. �For a current list, click of the link: https: //pslatwork. com/category/cook-county-opt-out/ �In addition to these two new ordinances, the state of Illinois has also passed a new law that extends sick pay benefits to family members of employees. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 4

Cook County & Chicago Ordinances 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 5

Who Qualifies for Paid Sick Leave? �Employees are eligible for paid sick leave if they: � work at least two hours in a two-week period while physically present in the geographic boundaries of the City of Chicago and/or Cook County, and � work at least 80 hours in any 120 -day period. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 6

Who is a covered employer? �A covered employer includes individuals and companies with a place of business in Cook County and/or Chicago that employ more than 1 individual. �Cook County’s ordinance excludes government entities and Indian tribes from the paid sick leave requirement, and employees covered by collective bargaining agreements are able to waive the requirements in their contracts. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 7

Who is a covered employer? �Chicago’s definition of “employee, ” which references the Illinois Minimum Wage Law, excludes five types of employees from paid sick leave coverage: agricultural employees, outside salespersons, members of religious corporations or organizations, students at an Illinois college or university who are covered by the Fair Labor Standards Act, and employees of motor carriers. �Both ordinances exclude construction workers subject to collective bargaining agreements. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 8

How many hours are employees permitted to accrue and at what rate? �Employees accrue paid sick leave beginning either on the first calendar day after commencement of their employment or on July 1, 2017, whichever is later. �Paid sick leave accrues at the rate of one hour for every 40 hours worked. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 9

How many hours are employees permitted to accrue and at what rate? �For salaried employees classified as exempt, such employees are presumed to have worked 40 hours each week. �Each employee is capped at accruing a total of 40 hours of sick leave each year, unless the employer opts to set a higher limit. �The employer can designate the “year” either an anniversary year, calendar year, fiscal year or any other one year period. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 10

How many hours are employees permitted to accrue and at what rate? �Employees can accrue and use up to 40 hours of paid sick leave per 12 -month period. �Employees may be required to wait 180 calendar days following the start of their employment before they are able to use any accrued leave. �Although not expressly stated in the law, presumably employees who have been with an employer for more than 180 days on the effective date of the ordinance can begin to use paid sick time as soon as they accrue it. �An employer can be generous and have a shorter waiting period. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 11

What happens if the employee has break in service? �In Cook County, if an employee has a break in service of less than 120 days, then upon rehire, the employer must count all previous employment towards eligibility for PSL, but need not make previously accrued but unused time available for use. �In Chicago, if the break in service is less than 12 months, an employer may but is not required to make previous accrued but unused time available for use. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 12

Who determines how much paid sick time an employee should use at any one time? �The employee generally determines how much paid sick time to use at any one time (e. g. , a single day vs. multiple, consecutive days), subject to the rules set forth above. �Employers may, however, set a reasonable minimum increment usage requirement not to exceed four hours per day. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 13

For what purposes can an employee use paid sick leave? �An employee can use paid sick leave: �for his/her own or a family member’s illness, injury, medical care, treatment, diagnosis or preventative medical care; �if s/he or a family member is the victim of domestic violence or a sexual offense, as defined by law; and/or �if the employee’s place of business, or child’s school or place of care, is closed by government order due to a public health emergency. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 14

For what purposes can an employee use paid sick leave? �“Family members” under both ordinances are defined broadly, and include the employee’s child (biological, adopted, step, and foster), spouse, domestic partner, parent (including biological, foster, stepparent, or adoptive parent), sibling, grandparent, grandchild or other blood relative, or any person whose close association with the employee is the equivalent of a family relationship. �(The Chicago rules also include “godchild, ” godparent, ” or “co-parent, ” though this likely would also be included in the catch-all definition of those with a “close association” under both ordinances. ) 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 15

Can an employer require the employee to provide notice? �If an employee’s need for paid sick leave is reasonably foreseeable (e. g. , prescheduled appointments with health care providers and court dates), an employer may require up to seven days’ notice before leave is taken. �If the employee’s need for paid sick leave is not reasonably foreseeable, an employer may require notice as soon as practicable on the day the employee intends to take the paid sick leave. �An employee may notify the employer of the need for leave via phone, e-mail or text message if the need for leave is not reasonably foreseeable. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 16

Can an employer require the employee to provide notice? �The employer likewise cannot require the employee to find a replacement worker, potentially leaving the employer in the lurch when its employees call in sick. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 17

Can an employer require a doctor’s note? �If the employee is absent for more than three consecutive work days, then an employer can require documentation signed by a licensed healthcare provider that the paid sick leave was used in accordance with the law. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 18

Can an employer require a doctor’s note? �Certification that paid sick time was authorized may include: �Illness/Medical Care or Family Illness/Medical Care- documentation signed by a licensed health care provider; no requirement that the documentation specify the nature of the injury, illness, or condition, unless required by law; or �Victim of Domestic Violence or Sex Offense-eligible employee’s choice of no more than one of the following per leave related to the same incident of violence or perpetrator: a police report, court document, a signed statement from an attorney, a member of the clergy, or a victim services advocate, or any other evidence that supports the employee’s claim, including a written statement from him or her, or any other 24 th Illinois Statewide Payroll Conference person who has knowledge of the circumstances. "Be a Payroll Champion" 19

May an employer withhold or delay paid sick leave or payment of sick time due to failing to receive the required certification? �If an employee takes or requests paid sick leave for a reason authorized under the law, the employer cannot delay its commencement or payment of wages for not receiving the required certification. �If an employee uses paid sick leave for a reason that is not authorized under the ordinance, including the use of paid sick leave without ever providing the required certification, an employer may take disciplinary action (such as counting the absence against an employee under the employer’s attendance policy), up to and including termination, against the employee. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 20

Can hours carry over to the next 12 -month period? �Yes. Employees can carry over half of their unused paid sick leave, up to a maximum of 20 hours, to the next 12 -month period. �Additionally, employees who work for an employer covered by the Family and Medical Leave Act (“FMLA”) may carry over up to 40 hours of unused accrued paid sick leave to use exclusively for FMLAeligible purposes. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 21

FMLA Requirements �Employer Coverage: �FMLA applies to all: � public agencies, including State, local and Federal employers, and local education agencies (schools); and, � private sector employers who employ 50 or more employees for at least 20 workweeks in the current or preceding calendar year - including joint employers and successors of covered employers. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 22

FMLA Requirements �Employee Eligibility: �To be eligible for FMLA leave, an employee must work for a covered employer and: � have worked for that employer for at least 12 months; and � have worked at least 1, 250 hours during the 12 months prior to the start of the FMLA leave; and, � work at a location where at least 50 employees are employed at the location or within 75 miles of the location. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 23

Can hours carry over to the next 12 -month period? �Employers are required to permit this "carry over, " the ordinance notably does not require employers to pay out on any accrued but unused sick leave upon employment termination. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 24

What are the notice requirements for the Employer? �The ordinances also require employers to: � post a notice in a conspicuous place within the workplace advising employees of their rights to paid sick leave and � include such a notice with an employee’s first paycheck (City of Chicago) or provide such notice at the time of commencement of employment (Cook County). 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 25

What are the notice requirements for the Employer? �For a copy of the model Cook County Notice, click on the link: https: //www. cookcountyil. gov/service/earned-sickleave-ordinance-0 �For a copy of the model Chicago Notice, click on the link: https: //www. cityofchicago. org/content/dam/city/depts /bacp/Consumer%20 Information/pslnoticefinal 060717. 24 th Illinois Statewide Payroll Conference pdf "Be a Payroll Champion" 26

What rights to the employees have if the employer does not provide leave? �The Ordinances provide an employee with a private right of action for an employer’s non-compliance with any provision of the law. �Any affected employee may recover damages in the amount equal to three times the full amount of any unpaid sick time denied or lost by reason of the employer's violation, interest, costs and attorney's fees. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 27

The Illinois Employee Sick Leave Act Public Act 99 -0841 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 28

Introduction �Unlike the Cook County and Chicago Ordinances, Illinois’s new law does not require employers to provide paid sick leave to their employees. �It requires employers who already provide PAID OR UNPAID personal sick leave to allow employees to use that sick leave to care for family members. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 29

Introduction �An employee may use up to half of his/her accrued leave time for absences due to illness, injury, or medical appointments of the employee’s family member. �Family members covered by the law include the employee’s child, stepchild, spouse, domestic partner, sibling, parent, mother or father-in-law, grandchild, grandparent, or stepparent. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 30

Who Is Covered? �All Illinois employers who provide personal sick leave benefits to their employees are covered by the Act. �The Act defines “personal sick leave benefits” to include time accrued and available to employees to be used for absences related to personal illness, injury, or medical appointments. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 31

Who is not covered? �Employees of employers that are subject to Title II of the Railway Labor Act �Employers or employees as defined in either the federal Railroad Unemployment Insurance Act or the Federal Employers' Liability Act, or other comparable law �Any other employment that the Illinois Department of Labor (IDOL) exempts under regulations to be promulgated. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 32

If my company does not already provide personal sick leave benefits to our employees, are we now required to do so? �No. The Act does not require employers to adopt sick leave policies if they do not already have them in place. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 33

Can employers restrict the use of personal sick leave benefits for the care of family members? �Employers may limit the use of sick leave benefits for absences due to the illness, injury, or medical appointment of a family member to an amount that is not less than the amount of personal sick leave the employee would accrue during six months at the employee’s current accrual rate. �Employers may restrict employees from using more than half of their yearly sick leave benefits for the care of family members. �The Act states that it does not extend the maximum amount of leave to which an employee may be entitled under the federal Family and Medical Leave Act of 1993. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 34

What if my company already provides employees with leave to care for family members? �Employers who have paid time off policies that provide leave benefits for the care of family members as required by the Act are not required to modify such policies. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 35

Are there any other requirements under the Act? �Employers are prohibited from denying employees the right to use personal sick leave benefits for the care of specified family members in accordance with the Act. �It is unlawful for employers to discharge, threaten to discharge, demote, suspend, or discriminate against employees for using sick leave benefits, attempting to exercise their rights to use sick leave benefits, filing a complaint with the Illinois Department of Labor, alleging a violation of the Act, cooperating in an investigation or prosecution of the Act, or opposing any policy, practice or act that is prohibited by the Act. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 36

Are there any other requirements under the Act? �When sick time granted in amounts based on years of service rather than on an accrual basis, use of sick time for family members can be limited to one-half of the employee's maximum annual grant. �An employer may require written verification from a healthcare provider to verify that the employee's absence fell within the scope of the act if the employer requires verification when the employee uses sick leave for his/her own illness, care, diagnosis or treatment. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 37

How can an employee file a complaint alleging a violation of the Act? �An employee who believes his or her employer has violated the Act by not allowing him or her to use personal sick leave benefits in the manner described in the Act may file a complaint with the Department of Labor. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 38

Action Steps �In view of these new laws, an employer may want to take some of the following steps: �Can track when employees are eligible to take leave and how much leave is taken �Make sure that your definition of “family member” under company policy complies with the new laws’ definition. �Amend existing company leave policies to ensure that accumulated time may be taken for the care of a family member. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 39

Action Steps �In view of these new laws, an employer may want to take some of the following steps: �Post Notice of Rights pursuant to the new ordinances. �If your existing policy provides a cap on the amount of sick leave or personal time an employee can accrue, be sure the policy complies with the new laws; specifically, be sure that when the ordinances go into effect on July 1, your employees will be able to accrue at least 40 hours of paid sick leave or personal time off in compliance with the new ordinances. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 40

Action Steps for a Company �How will anemployer identify and follow those that are eligible and time taken. �Ask for procedures if staff member takes leave. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 41

Other Matters �Employers in Chicago and Cook need to determine if they are subject to this paid sick leave ordinance, and if so, whether their existing PTO/paid sick leave policies are compliant or if modifications are needed. �Ensuring proper accrual credit and use will involve ongoing recordkeeping and follow-up. �Employers will need to inform their supervisory ranks that retaliation against employees who take paid sick leave is prohibited, and that any absences due to paid sick leave may not be used against employees under an absenteeism policy. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 42

Moving forward �Reasonable suspicions regarding the misuse of paid sick leave should be reported and investigated to prevent abuse. �Employers also may wish to prepare their operations for increased and unexpected employee absences, as well as any budgetary issues that may result from fluctuations in manpower due to paid sick leave use. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 43

Other Compliance Matters 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 44

MEWAs �What they are? �What the consequences? �Nondiscrimination testing? 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 45

Cash Out Benefits �Giving cash to employees to waive coverage �Benefit is taxable �Election must be though cafeteria plan �If not through a cafeteria plan, employees are taxed on cash if elected benefits �Cash benefit must be added to the cafeteria plan 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 46

Wrap Documents �Needed to satisfy ERISA requirements �Reduce Form 5500 burden �Need to be produced on DOL audit 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 47

Wrap Documents �Information needed �Plan Year issues �Necessary and unnecessary provisions �Plan document/SPD combo issues 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 48

1099 Employees �Not employees �Providing coverage may make them employees �Providing coverage may make plan a MEWA �Withholding Issues 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 49

Fixed Indemnity Programs � Two recent IRS memorandums “ � 201703013 � 201719025 � Premiums for fixed indemnity program paid with pretax premiums � Benefits taxable if premiums paid pretax. � If distributions made exceed the value of expense, excess is taxable even if contributions are after-tax, � Employer may have withholding issues when employee receives benefits. � Employer may not have knowledge of receipt of payments. � Wellness payments may be taxable for not a medical expense. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 50

Fixed Indemnity Programs �A benefit paid under an employer-provided self-funded health plan included in income and wages if the average amounts received by the employees for participating in a health-related activity predictably exceed the after-tax contributions by the employees. � A large portion of the pre-tax contributions are returned to the employees as cash payments from the self-funded health plans or rewards through the wellness plans that are purportedly not includible in income or wages. 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 51

Questions? ? ? ? 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 52

Contact Information �Larry Grudzien, Attorney at Law �Phone: 708 -717 -9638 �Email: larry@larrygrudzien. com �Website: www. larrygrudzien. com 24 th Illinois Statewide Payroll Conference "Be a Payroll Champion" 53