United States: Doubling Down In The Second City: Chicago Adopts Expanded Paid Leave Benefits For All Employees

Over the objections of the business community, Chicago's City Council last week adopted one of Mayor Brandon Johnson's signature policy goals of his young mayorship, doubling paid leave benefits for nearly all employees working in Chicago. The city's new Paid Leave Ordinance (PLO) overhauls the existing paid sick leave ordinance, requiring Chicago employers to provide employees 80 hours of combined paid sick leave (PSL) (40 hours) and personal time off (PTO) (40 hours). PLO benefits are more expansive than existing paid leave obligations under the Paid Leave for All Workers Act (which are only available to Illinois employees working outside Chicago and some other municipal jurisdictions) and apply to all employees who perform at least two hours of work in any particular two-week period while physically present in the geographic boundaries of Chicago. Benefits must start accruing on January 1, 2024, so employers have precious little time to prepare.

Accrual and Carry Over

Under the ordinance, leave must accrue at a rate of one hour for every 35 hours worked — a higher rate than the current one hour for every 40 hours worked rate — up to a combined total of 80 PSL and PTO hours annually. Alternatively, employers may frontload 80 hours of time off each benefit year or provide employees with "unlimited" paid time off benefits as long as such benefits can be taken for any reason and are otherwise consistent with the ordinance's notice rights and obligations. Unless an employer front loads or adopts an unlimited paid time off benefit plan, unused time must carry over year-to-year, at a rate of up to 80 PSL hours and 16 PTO hours, for use in the following benefit year. As of the date of this publication, there are no express caps on annual accrual amounts or use. In other words, as drafted, employees can accrue up to an additional 80 combined hours of paid time off on top of whatever is carried over from the prior year, for a combined maximum of up to 176 hours (i.e., 22 days) of paid time off benefits in a given benefit year.

Importantly, unlike the current paid sick leave benefits available to Chicago employees, some employers will have payout obligations upon an employee's termination. Specifically, employers with over 100 employees must pay out employees for all unused PLO benefits when they (1) separate from employment for any reason or (2) cease to meet the definition of a covered employee (i.e., transfer outside of the geographic boundaries of the city). Similarly, employers with between 50 and 100 employees must pay departing employees for sixteen hours of unused time through 2024 and must begin paying out all unused time starting in 2025. Small employers with 50 or fewer employees do not have any payout obligations.

Use and Limitations

Consistent with currently existing PSL requirements, employees can use their allotted sick leave hours for things like caring for themselves or family members when ill, seeking medical treatment, or if they are domestic violence victims. While employers can request advance notice for PSL time off, employees who cannot provide it due to unforeseeable circumstances need only provide notice that is reasonably practicable under the circumstances. On the other hand, employees can take their PTO benefits for any reason they choose — vacation, time with family, or just a day off — but employers can establish written policies requiring reasonable advance notice and advance approval. Employers can also set reasonable minimum increments for use of PLO benefits, not exceeding two hours for PSL or four hours for PTO. The ordinance does not apply to employees working under an existing collective bargaining agreement, but, for any new agreement entered into after January 1, 2024, a waiver of the application of the ordinance must be explicitly set forth in the new agreement.

The Upshot

The vast expansion, and current lack of some critical detail, in the new PLO ordinance is likely to have real economic and practical consequences for many employers, especially those without existing paid time off benefits or are struggling with staffing shortages. Even employers that comply with Chicago's existing paid sick leave obligations will be required to change their policies to allow for greater rollover rights, faster accrual rates, and payout obligations at termination — something that requires quick attention to come into compliance before the January 1, 2024, effective date. Given these and other implications, it is possible more employers will consider adopting unlimited paid time off programs to minimize the accrual, carry over, and payout burdens the new ordinance places on employers. Notwithstanding, unlimited paid time off programs come with their own burdens and complications, and employers will need to think strategically about what approach is best for their workforce.

In spite of all of these changes, one thing is certain: employees have greater choice, flexibility, and economic certainty under the new ordinance — assuming employers can readily adapt to the changes.

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