Another Cost of Independent Contractors Reclassified as Employees
Businesses whose workers are now classified as employees thanks to AB 5’s adoption of the ABC test not only have to pay additional payroll taxes for these employees but must also provide mandatory sick pay benefits.
The Basics
Most employers must provide at least 24 hours, or three days, of annual paid sick leave to California employees who work for them for at least 90 days. Some cities, such as Los Angeles and San Francisco, mandate more sick pay coverage.
Covered employees include part-time, temporary, and seasonal employees, as long as they work at least 30 days for the same employer. Temporary employees of a staffing agency are covered as well. Whoever is the employer or joint employer is required to provide paid sick leave to qualifying employees.
The mandate does not apply to:
- employees, including construction workers, covered by certain collective bargaining agreements;
- certain flight deck and cabin crew employees of air carriers; or
- CalPERS retired annuitants.
Benefit Accrual
Benefits generally accrue at the rate of one hour per every 30 hours worked. However, employers may use a different accrual method, as long as the accrual is on a regular basis so that an employee has no less than 24 hours, or three days, of accrued sick leave or paid time off by the 120th calendar day of employment, or each calendar year or 12-month period. An employer may limit an employee’s use of paid sick days to 24 hours, or three days, in each year of employment. Employees must be permitted to start using the sick time beginning on the 90th day of employment.
Upfront Benefits
An employer can avoid having to compute and carry over unused sick days on its books by making 24 hours, or three days, of sick pay available up front at the beginning of the year. The “year” for this purpose can begin at the beginning of the calendar year, work anniversary date, or other 12-month basis.
Nontraditional Shifts
The Department of Industrial Relations has determined that the Labor Code specifies a minimum labor standard, and “in order to give effect to this minimum standard for all employees, including those that may work more or less than eight hours per day, the language must necessarily be interpreted as requiring ‘24 hours or three days’ of paid sick leave, whichever is more for an employee.” This means that if an employee’s regular workday is 10 hours, a paid sick day would be 10 hours. The paid sick time offered to that employee must be at least 30 hours per year. However, if an employee’s normal shift is less than eight hours, they must still be offered at least 24 hours of paid sick leave each year. These minimum requirements apply both to employers who offer accrued sick pay benefit and employers who offer upfront sick pay benefits.
For more information about this article, please contact our tax professionals at taxalerts@windes.com or toll free at 844.4WINDES (844.494.6337).
This article is reproduced with permission from Spidell Publishing, Inc.